No 1203: Biofuels, ethanol, biodiesel, clean energy

Moved: http://www.no1203.com

2008-01-02T16:08:00.000-08:00

As you've noted on previous entries, this site has moved to a new home at http://www.no1203.com. Please make note of this change as well as subscribe to its feed. Our goal is to make this new home a much more versatile and user-friendly environment for this blog. We've already made several updates to the site including the following:

Events
We have an updated list of upcoming biofuels events throughout the world.

Company Directory
We are developing a new searchable company directory that contains updated information on clean-tech related companies. This directory includes new start-ups (Gevo, ZeaChem) as well as large corporations with clean tech product offerings (GM, WR Grace).

E-mail subscriptions
We have set up this blog to utilize e-mail subscriptions via Feedburner. Subscribers can receive updated blog entries via regular e-mail update.

Thanks again for your continued interest in this blog. Please visit our new home at www.no1203.com.

Sincerely,

Doug Williams

The Energy Bill Impact

2007-12-24T22:39:00.000-08:00

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It's done. It's signed. The 2007 Energy Bill (officially as HR 6 The Energy Independence and Security Act of 2007) has several far-reaching policies. I wanted to take a look at two important ones: the expanded renewable fuels standard (RFS) and the increased CAFE standard.

Read More...

Finavera signs PPA deal with PG&E

2007-12-19T18:07:00.000-08:00

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Finavera has signed a power purchase agreement with PG&E for a 2 MW installation to be cited 2.5 Miles of the coast of California.

Senate Expands Farm Subsidies

2007-12-19T18:04:00.000-08:00

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You read that right. The Senate passed 79-14 to expand the farm subsidies. This is clearly a political move to appease the farm states before the 2008 election. But be that as it may, even Senators from those states noted the conflict of expanding farm subsidies during the time of high corn and other commodity prices.

Read more...

Amory Lovins @ TED

2007-12-13T23:25:00.000-08:00

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A more brief and interactive overview of Winning the Oil Endgame.Download the book at: OilEndGame.com

See the new blog...

Done - New Energy Bill Passes

2007-12-13T23:24:00.000-08:00

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The Senate finally passed the latest energy bill. Many provisions remain in it including a 35 MPG CAFE standard, support for 36 Billion gallons of ethanol use by 2022 and more.

From the Detroit News Article:

Senate Democrats stripped out requirements that utilities produce 15 percent of their energy from renewable resources by 2020 and also agreed to drop $21.8 billion in new taxes, mostly on oil companies, to try get approval.

While I understand why the taxes didn't get imposed, I'm wondering what the sticking point was with a renewable porfolio standard. This would require utilities to use a given percentage of their electricity production from renewable sources (15 to 20% seems to be popular). Many of the states contain RPS standards and are actively pushing to meet them. They are a mix of states (mostly sunny and windy ones of course). While I can understand why a federal mandate would be uncomfortable to some (particularly those who don't really support the need for renewables). But there seems to be a significant support for it in the country. Maybe it's just ahead of its time.

Pacific Ethanol falling off a cliff

2007-12-13T13:15:00.000-08:00

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Pacific Ethanol has been facing some really tough times of late. I reported earlier that Bill Gates' fund is seeking to sell its shares of the company which have significantly diminished in value in recent years.

Recently, PEIX has halted its construction of its Imperial Valley plant. This is undoubtedly due to the falling ethanol prices and high corn prices affecting its financial performance (which its latest report in November also wasn't good).

Energy Bill still has some life

2007-12-13T13:13:00.000-08:00

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[Update] Recent vote fails. Senate not giving up though.

[Update] Senate Republicans seem to be pushing back on the proposed bill due to increases in taxes to the oil industry. ( Read CNN Article)

Senate leaders have been working hard to pass an energy bill that includes higher CAFE standards for cars.

Good Technology

2007-12-12T13:14:00.000-08:00

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CO2 "reenergizing".
Sandia National Labs is continuing its research on using sunlight to convert CO2 into CO, a much more usable gas that can be converted into fuels and other chemicals. From the Press Release:

Using concentrated solar energy to reverse combustion, a research team from Sandia National Laboratories is building a prototype device intended to chemically “reenergize” carbon dioxide into carbon monoxide using concentrated solar power. The carbon monoxide could then be used to make hydrogen or serve as a building block to synthesize a liquid combustible fuel, such as methanol or even gasoline, diesel and jet fuel.

Read More »

Cheaper Fuel Cell Membranes
Researchers at Ames national labs has made a discovery in developing cheaper fuel cell membranes. In short, the scientists used techniques to survey the properties of a very high-performance membrane called Nafion. They discovered that the long chains tend to have very small defects that, when aligned with each other, form channels throughout the structure of the membrane. These channels facilitate better mass transfer mechanics throughout the membrane including better dewatering properties (very important) and high-temperature operation. This knowledge could allow for developing ways of building in these properties in future designs that push these new properties into areas that could make fuel cells more commercially viable.

Read the Press Release »

Geothermal smell test
Geothermal energy is getting more attention these days as a form of "clean" electricity generation. The problem, however, is that there is a limited number of places where Geothermal can be implemented. Locations with volcanic activity, such as Iceland, have many viable locations. But other less volatile locations are harder to find. Discovering these locations requires a lot of surveying and digging to find just the right spot.

Technology Review is reporting that researchers at Lawrence Berkeley National Labs and Arizona State have discovered a possible means of detecting suitable geothermal spots. In short, they have discovered a correlation between geothermal activity and a concentration of Helium isotopes. Essentially, elevated levels of H-3, very prevalent in the earth's mantle, but not the earth's crust, gives an indication of exposure to the mantle's heat resources. From the article:

The geochemists believe that Dixie Valley, which lies in an isolated island of elevated helium-3, shows that fracturing of the normally impermeable barrier between the earth's mantle and crust can set up a natural geothermal system. They speculate that, once sheared open, the fractures fill with high-pressure fluids that transport helium to the crust along with lots of heat. The heat sets up a convection cycle in the crust in which heated groundwater rises to the surface, dumps its heat, and then circulates back down for more.

"Dixie Valley is a very productive geothermal field," says Kennedy. "The question now is, are all [such helium] anomalies potential geothermal resources? That would take somebody to go and do some more exploration work, but I would point them to those areas of anomalies first."

Discoveries like this are exactly what is needed to push the commercialization efforts of geothermal. Reducing the cost of discovery and construction of facilities could make this natural resource a viable part of our energy portfolio in coming years.

Read the Technology Review Article »

Just a reminder: why we like gasoline
I know everyone's touting the Tesla roadster as a high-performance hot-rod that pollutes less. But...just as a reminder - this is why we like gasoline.

CNET Review of the 2008 Saleen S302

0-60 in < 4 seconds (like the Tesla), but a little more traditional design, nicer interior, and other options. And...you get a stick shift (which I swear by). It's cheaper too.

Cars like this is why we get so excited about them. In days when hybrids and PHEVs get so much attention from their environmental impact, it's important to remember what makes us so passionate about cars in the first place. They're not just utility items - they're things that express the passions that humans are capable of. While we certainly need environmentally-sound products, it's important to reflect on what was good about cars before we learned of their environmental hazards.

Biofuels Startups Leaving California?

2007-12-12T12:07:00.000-08:00

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Cleantech.com has an interesting article regarding some rather interesting remarks made by Vinod Khosla at a conference in San Francisco recently. His comments were about the prospects of many clean-tech start-up companies looking outside of California both for talent and opportunity.

Here are some of the highlights:

[Khosla] “Because of the cost, they’re actually wondering whether they should be leaving California or not. Given some of the regulations and how long it takes to build pilot facilities, they think they can move much faster in Colorado.”

The article goes on to say:

Local permitting cycles are so arduous, he said, that California solar companies like Khosla investment Ausra (formerly Australian-based) have started looking for new contracts outside the state because of the long permitting cycles—even though local utilities like PG&E continue to actively seek renewable energy providers.

And:

“Despite our best efforts, all the bioplastics companies want to migrate to Minneapolis for one reason or another. Some of the agricultural companies like Cargill and ADM are in the Midwest, so the scientists are in the Midwest. Every time you look for talent, people tend to be available in Minneapolis, or Michigan. It’s a major area we should have an initiative on in the Bay Area.”

Note: Cargill is headquartered in Minneapolis, MN and ADM in Decatur, IL

This, of course, all makes sense to a native Midwesterner. While there is certainly extraordinary talent in the Bay Area, there is equal talent in many other parts of the country. Many of the innovations and discoveries that are driving much of the biofuels and bioplastics industries are from Midwestern states. We've seen Universities like Penn State, Wisconsin, Ohio State, Michigan state all have significant discoveries that could have great opportunities for clean tech-related ventures.

This breaks from a lot of Silicon Valley investing - and VC investing in general. VCs tend to invest in things that are close to them. That has lent itself to a lot of businesses gravitating towards where the money is - Sand Hill Road in Menlo Park and in Cambridge, MA. But biofuels is a local business that is driven by the agricultural community. And that is requiring many of these VCs to look outside of their backyard for talent.

I think they'll be pleasantly surprised at what they find.

Toyota 1/X Concept video

2007-12-12T12:05:00.000-08:00

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CNet has a nice video of the Toyota 1/X concept.

Watch it here.

E3 files for bankruptcy

2007-12-12T12:04:00.000-08:00

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Ethanol Producer Magazine is reporting that E3 Biofuels Mead has filed for Chapter 11 Bankruptcy:

A complete list of E3’s finances must be filed by Dec. 17 with a reorganization plan due March 31, 2008.

According to R. J. Wilson, a spokesman for E3 Biofuels, the "mechanical errors" that were reported by the Omaha World Herald and OPIS will be the subject of future litigation. If the mechanical problems had not occurred, E3 Biofuels says it would have been able to continue producing fuel despite the high cost of feedstocks. No further comment was available.

Apparently, this is due to "mechanical problems" that has caused the company to shut down for some time.

This is a bit disturbing. Mechanical failure for any manufacturing facility - let alone a start-up facility - should be expected. This shows three things:

1) This company is inadequately financed. Any start-up company needs enough working capital to weather these types of moments. The nature of this business is even more necessary.

2) There is still a lot to learn about operating this facility that needs to be mitigated. It may not be related to the work done by the plant staff. Given the very rural location, maintenance services and the like are probably hard to come by (and expensive). I worked in plants in the middle of Los Angeles - so I could get same day service. But when I worked in the backwoods of Louisiana, we had to be a little more self-sufficient.

3) The plant's design may have too much risk associated designed into it. If the plant is down for any length of time, the company goes out of business. So the way to mitigate it is to produce several processing channels - instead of one big plant, have many smaller capacity plants that run in parallel. There are drawbacks to each (the downside to multiple plants is that you have many opportunities for failure, high fixed costs, and there's a lot of real estate taken up). (Given that I know next to nothing about this plant, this is all hypothetical).

Whatever the reason, it doesn't sound as though this facility had the resources it needed to weather a storm in its first six months.

Venture Update

2007-12-08T17:24:00.001-08:00

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OPX Biotechnologies gets $3.6 Mil from MDV

OPX Biotechnologies is attempting to develop biofuels by altering the DNA of fermentable micro-organism.

Read the VentureBeat Article.

This company doesn't seem to be terribly different from others doing recombinant DNA-based process development (Amyris, LS9, Synthetic Genomics, Gevo, Cobalt, and others). So it's not clear, yet, what their real innovation is (Although I have to discount this statement as investing in "yet another" of these companies can be a great investment opportunity and still may produce a successful process down the line).

Hopefully, more information will be forthcoming on this venture.

The Energy Bill Politics

2007-12-08T10:50:00.000-08:00

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There's been a lot of press on the House's passing of the latest energy bill. The bill calls for higher CAFE standards, more biofuels, and more solar. I've kept away from talking about it until now because I wanted to really look at it and see if really is as important as the press is making it out to be.

Read More »

Good Technology

2007-12-07T14:45:00.000-08:00

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Hydrogen Storage Breakthrough

Europeans identify a Lithium Borohydride conformation that shows a 18 wt % capacity for storage of hydrogen. This could be a great advancement for the storage of hydrogen in auto and other applications.

Read Article »
GreenCarCongress »

Researcher Team Identifies High Temp Organism

A multinational team of researchers have identified a bacteria that produces hydrogen and ethanol when fermented. The interesting element to this is that this bacteria can survive at high temperatures. This is an interesting opportunity as it may provide a very robust platform for producing hydrogen or fuel ethanol.

GreenCarCongress Article »

Austrialian PM moves to ratify Kyoto

2007-12-05T21:39:00.001-08:00

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Australia, long criticized along side the U.S. for having not signed the Kyoto protocol, has moved to ratify the agreement. The freshly-elected Prime Minister Kevin Rudd signed the agreement recently in-line with his political promises.

DOE gives money to Biomass to Liquids studies

2007-12-05T12:35:00.000-08:00

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The Department of Energy announced funding of four biofuels projects based on a thermochemcial (gasification to syngas) platform. Each project may receive up to $7.7 Million. Below are the descriptions of the projects from the DOE Press Release .

Up to now, the DOE's funding of biofuels projects have focused on basic research and building pilot projects for a fermentation pathway. While this is certainly a good sign from the government, the lack of real dollars behind it is disturbing.

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Big ideas about climate engineering

2007-12-05T12:23:00.000-08:00

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I really like hearing about big, crazy ideas. Most times these ideas aren't really feasible - like the flying car. But thinking about them gets us to stretch ourselves beyond our normal confines of what is reasonable.This TED presentation talks about a big, crazy idea about deploying particles in our atmosphere intentionally to cause an immediate global cooling effect (similar to those seen following large volcano eruptions). Even the presenter thinks the idea is crazy and presents a very real and evident moral hazard. But the discussion is worth having as it touches on several different topics around ethics, governance, and the role that technology ought to play in humanity.Leave a comment and let me know what you think.

Watch the video on the new site »

Ethanol a ‘failure’?

2007-12-03T11:22:00.001-08:00

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CNBC personality Jim Cramer noted in a video on thestreet.com that "the ethanol strategy has failed." Is he right?

The answer is only sort of. There are three reasons why I think this is ambiguous.

What does "failure" mean?

To start, the notion of "failure" implies, in the strictest sense, some pre-determined expectation to which it is being compared. The obvious expectation is the guidelines set by the government - 35 Billion gallons by 2022. Since we currently have 7 Billion gal/yr of capacity, it would require a compound annual growth rate of around 11%. Or, it's actually around 2 Billion gallons of capacity/yr. This last year, we built around 1.2 Billion. So we're a bit slow, but if the market demand was really there and with some design innovations, we could probably get to that point down the learning curve (we're really at the start). So I wouldn't call the ethanol industry a 'failure' this early in the game.

Read More...

The Biobutanol Pathway

2007-12-02T11:03:00.000-08:00

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Biobutanol is being touted as a second generation (Gen2) biofuel. There are several companies working on this prospect. However, biobutanol, unlike ethanol, is not readily made and a lot of groundwork needs to be done to bring it to fruition.

While not a lot is talked about in how to make biobutanol, there are a few pathways for producing it.

The bacteria pathway
One pathway that is getting the most attention is the most evident fermentation pathway. The bacteria Clostridium acetobutylicum is a commonly known bacteria that naturally produces acetic acid, ethanol, and butyric acid through anaerobic fermentation. This bacteria has been thoroughly studied over the last decade and is well understood. Historically, however, none of its products were very valuable. Now-days, several start-up companies - Gevo, Cobalt Biofuels, BP/DuPont most notably - are investigating this bacteria to realize its potential to produce biobutanol.

I don't know what any company in particular is working on (other than what's publicly available information). But it doesn't take much of an imagination to figure out the need to genetically modify this bacteria using standard-issue recombinant DNA methods to maximize the butyric acid production. Butyric acid can be, then, converted into butanol (or any other related product they can get this thing to produce).

This is a perfectly legitimate target for producing biobutanol and should prove fruitful. There are several other innovations that need to take place (purification, etc) that could feasibly be developed via the current ethanol industry (there are several issues that apply). I would be surprised if there aren't at least 6 or 7 more companies doing research along these lines in the near future.

Thermoprocessing platform
While the fermentation pathway seems pretty clear at the moment, there isn't much dialog out there about using a thermoprocessing pathway. I've only seen two companies that I could speculate could develop a biobutanol pathway - ZeaChem and RangeFuels. RangeFuels has a gasification and liquefaction process based on a catalytic process. Theoretically, they should be able to produce biobutanol with a different catalyst than what they're using to produce ethanol.

ZeaChem, whose process sounds a bit more convoluted (so this is even more speculative) produces acetic acid as an intermediate product from a fermentation process. I would presume that fermenting to butyric acid (which we know is possible using C. Acetobutylicum) which could later produce biobutanol using the hydrogen produced in another process. Of course, this is all speculation. And of course, even ZeaChem doesn't know if all of this will work yet - they're still trying it all out.

So overall, there are some great opportunities for the production of biobutanol. But what's also clear is that it will take a lot more effort than ethanol. Ethanol still took more than 10 years to get to this point. And we've been producing ethanol (beer) for hundreds of years. There's a lot of groundwork that needs to be done for biobutanol to be made a real fuel option. And that will require at least 95% perspiration.

Good Technology

2007-12-01T14:43:00.000-08:00

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Carbon sequestration might work
Researchers at LEADS university have conducted research indicating that carbon sequestration may work effectively at storing CO2 in old oil deposits.
University of Leeds research shows that porous sandstone, drained of oil by the energy giants, could provide a safe reservoir for carbon dioxide. The study found that sandstone reacts with injected fluids more quickly than had been predicted - such reactions are essential if the captured CO2 is not to leak back to the surface.
Read the Press Release.

Cleaner Nuclear: Thorium
The U.S. Senate is pushing for more research into Thorium as a potentially safer fuel for nuclear power. Essentially, Thorium would produce much less radioactive waste (by a factor of 50%). Thorium is apparently harder to handle for use in a weapon (too many gamma ray radiation - so you're not going to handle this in a back alley or a cave).
Read the Technology Review article.

Moving....

2007-11-30T21:28:00.000-08:00

I have been slowly moving the content of this blog over to its own domain. My hope is that it will serve as a better service for readers and for me to continue my reading. The new home will be at:

http://www.No1203.com

I will continue to post on this blog through the month of December with a message noting the new location. Please update your bookmarks and, if you haven't already, subscribe to our feed.

Please also leave me a quick comment - I like to know you're still visiting.

Talk on the role of "bio-energy"

2007-11-30T11:54:00.000-08:00

Interesting TED talk about the use of bioenergy.

This is a really well-done presentation, but I don't think I get the point. I've watched this video several times and am a bit confused. It talks about how coal and oil are really broken down forms of biological energy and that we need to use biology to...do something with it. But...so what?

Maybe it's the Generation X gene in me, but I just don't see the point. I knew all of this before. Where's the innovation or insight that is evident in most TED presenters? I mean...sure we should use coal for energy. But it pollutes. So now what? How do the mountain of seeds - something that sounded really great - impact the mountain of coal...that he also says is dangerous to mine. What's the problem with ethanol - sure it's crappy, but it's cheap, we can make it, and it works.

Tesla gets new CEO

2007-11-29T12:59:00.000-08:00

Tesla Motors has hired Ze'ev Driori as its new CEO. Michael Marks, former CEO of Flextronics (and Tesla investor) has been the interim CEO.

From the Press Release:

The first company he founded was Monolithic Memories, a Silicon Valley semiconductor firm that pioneered fundamental advances in memory and logic technology, before being acquired by AMD in 1987. Under his leadership, Monolithic introduced programmable read-only memory (PROM) and programmable array logic (PAL), which revolutionized many aspects of computer and electronic systems technology. As CEO through 1981, Ze’ev was responsible for R&D, manufacturing, marketing, finance, world wide sales and overseas operations for product assembly. Ze’ev served as chairman of the board from 1981 through 1987.

While Ze'ev clearly has the track record to take on Tesla's challenge (and it certainly is a big challenge), I had anticipated a longer tenure for Michael Marks. I thought Marks had some great experiences that the company could build on to bring them to commercialization.

Ze'ev, however, sounds like a great person for the job. They have searched for this position for quite some time and it looks like they've found a winner.

VeraSun buys US Bioenergy

2007-11-29T08:50:00.000-08:00

VeraSun agreed to purchase US Bioenergy for around $685 Million.

Read the Press Release.

Under the agreement, 0.81 shares of VeraSun stock will be issued for each outstanding share of U.S. BioEnergy, valuing the deal at $686.2 million based on Wednesday's closing prices and U.S. BioEnergy's 79.6 million shares as of Oct. 31.

More on this a little later.

Update:
This acquisition makes perfect sense. VeraSun is desperately trying to keep a top position in the ethanol market and this acquisition keeps them their. Their scaling back of one greenfield facility was a sign that expansion through new capacity wasn't really viable at current demand/prices. So this is the next best thing - grabbing market share through M&A.

The market likes the deal too. These two companies have apparently fared well during high corn/low ethanol pricing. So it would seem to be a good match. This could launch them ahead of POET and ADM in terms of capacity. But if things get more tumultuous for corn and ethanol than this could be a big disadvantage to them. There's only so much you can gain by scale with regard to this industry. Corn processing is a local game. So the real way to keep ahead of price fluctuations are through risk mitigation of supplier and customer contracts. Everybody has to get good at that function in order to survive. This acquisition, then, won't automatically put them at a better position either operationally or financially. So the game is still afoot.

Bob Lutz at LA Auto Show talks about the Chevy Volt

2007-11-28T19:11:00.000-08:00

Presentation given by GM's Bob Lutz at the LA Auto show.

The video discusses some updates on the Volt. Nothing really new, but it's a nice update.

So where's the biofuels industry headed?

2007-11-27T22:30:00.000-08:00

While the housing crisis has taken center stage in the nation's economic dialog (as it should), the ethanol discussion has died down a bit. While all the negative press wasn't that great for producers, the broader economic environment will have a tremendous effect on the prospects of this industry. So it begs the question, where is the U.S. biofuels industry headed?

Where are we now?
Well, without going too deep into it, let's look at a few bullets:
- new plant construction projects are being cancelled.
- construction costs have increased due to a lack of available resources to build
- high corn prices have impacted the industry's profitability
- low ethanol prices due to increased production (and questionably lower/flat demand) have squeezed producers
- transportation options have higher costs

The news over the last few months, I think, paints a pretty clear picture of the challenges the industry is facing. I think we can, then, assert what the future outlook of this industry might be.

There are three elements that I think will shape the short-term outlook on the biofuels market:

Cost Management
Lets face it, the biofuels industry is a crappy one. When you're buying and selling a commodity with fluctuating prices, you're sure to get squeezed. So the viability of large producers comes in their ability to manage the risk involved with pricing through hedging practices.

Further, this current crop of production plants have to improve their efficiencies from all angles. This impacts product yield, energy consumption (and co-generation), and overhead costs.

Demand
It's not clear that the actual demand for ethanol will continue to grow. Even though the government is pushing for it, the market still needs to adopt it. The sharp reduction in ethanol prices in recent months seems to indicate an imbalance of supply and demand. In particular, it could mean that demand is increasing more slowly than capacity is increasing (so it would support recent plant construction pull-backs). It could also mean that demand is waning. It's not quite clear which. But the impact, then, is that while each company is jockeying for market supremacy, they must also manage their expansion plans to coincide with the real market demand.

Technology Development
It's already evident that the ethanol industry will not continue without a breakthrough in cellulosic ethanol. It's gotta happen or we're done.

What isn't well discussed is an innovation on ethanol refining technology. No matter what the upstream process technology is, ethanol must be separated from water. Currently, distillation is the method of choice. But it's energy intensive. Huge strides could be made with a low-cost means of separating ethanol from water.

So where are we headed?

Problems with financing
The problems affecting the commercial banks will affect this industry. Equity money is fairly available, although not necessarily easily gotten given the prospects of this market. But these types of projects usually don't go forward without some level of debt financing. And the debt markets are in the dumps at the moment. So everything I say for the rest of this post should be prefaced by saying "..if they can get financing...".

A day of reconning
It's clear that there will be a period of consolidation. While we have already seen some acquisitions, most likely, the smaller, less efficient facilities (say, less than 60 Million gal/yr) will go out of business. This business can only be survived on scale and these facilities won't be able to manage. According to the RFA's list of biorefineries, this assertion would implicate around 70 different facilities with around 2 Billion+ gallons/yr of capacity. Pacific Ethanol's story, then, doesn't look very compelling. And POET's looks a little dangerous (they have lots of smaller facilities).

New Players
The big boys in the ethanol (and even the biodiesel industry, although we're not quite there yet) will end up being ok if it keeps playing smart: VeraSun, POET, ADM, and Biofuel Energy. But the weakness of many of its other competitors could be a great opportunity for a new, technology-focused startup to emerge. Verenium would be an interesting opportunity. If their work with developing an enzyme solution for a cellulosic format, then they could do well. If Range Fuels' first plant does well, it could be poised to scale rather quickly.

New Fuels
For all the hype, ethanol is just a fuel additive at this point (and biodiesel is just a lark, albeit one with a lot of potential). But ethanol's life could end right here. It certainly has detractions as a fuel and with its compatibility with current transportation methods. But other chemicals could emerge as fuels in coming years. Biobutanol is getting good uptake and has some interesting prospects. Dimethylfuran has some potential as well. Synthetic fuels (gasoline produced from non-oil feedstocks like coal or plants) also have some interesting elements as well.

End of Round 1
In short, I'd predict that we're looking at the calm before the storm. While I wouldn't use the word "bubble", we are certainly looking at a potential shake-out of weak competitors (it's healthy though - we shouldn't look at it the same way we look at the first internet bubble bursting).

What we should really be preparing for - and perhaps investing in if given the opportunity - is Biofuels Gen 2.0. Gen 1.0 - corn ethanol, and soy bean biodiesel - may be reaching its feasibility limits. While it might not be completely down hill from here, it could be quite rough until some new opportunities come online. Get your checkbooks ready though.

I'll bring up some topics for Biofuels Gen 2.0 (or Fuels 3.0).

Gates getting out of biodiesel company

2007-11-26T20:59:00.000-08:00

Ethanol Producer Magazine is reporting that a private investment company owned by Bill Gates has made its shares of ethanol producer Pacific Ethanol up for sale:

Cascade Investment LLC, a private investment company owned by Microsoft chairman Bill Gates, has registered its 10.5 million shares of Pacific Ethanol Inc. as being offered for public sale. The registration came in a Nov. 16 SEC filing that noted Cascade Investment's 20.55 percent stake in Pacific Ethanol "may be offered for sale from time to time during the period the registration statement" remains effective.

Although this seems very crazy, it's prudent for this company to stop losing its money. The real news, then, is weather the ethanol industry is going to a "sell" status instead of just a "hold". It's certainly not a "buy" anymore. Although some start-up companies might be worth looking at.

Or another, just as relevant question is weather or not Pacific Ethanol is worth the investment. They have made big promises over the last few years, but at the end of the day, they're a small player. They don't have a roadmap to get them to be a top 5 player. They're not even a top 10 player anymore (see chart below).

So it's no surprise that Pacific Ethanol might lose one of their primary investors. I mean, if you lose their shirt, they're going to back out from the deal. That's no surprise.

	Company	Capacity (gal/yr)	Planned Capacity (gal/yr)	Market Share
1	POET	1110	375	16%
2	Archer Daniels Midland	1070	550	15%
3	VeraSun Energy Corporation	560	330	8%
4	US BioEnergy Corp.	300	400	4%
5	Hawkeye Renewables, LLC	220	220	3%
6	Aventine Renewable Energy, LLC	207	226	3%
7	Abengoa Bioenergy Corp.	198	-	3%
8	Global Ethanol/Midwest Grain Processors	152	-	2%
9	Cargill, Inc.	120	-	2%
10	Golden Grain Energy, LLC*	110	50	2%
11	Pacific Ethanol	110	150	2%

Is ethanol demand waning?

2007-11-25T10:08:00.000-08:00

I recently wrote about VeraSun's cancellation of its Reynolds, Indiana facility. There reason was falling ethanol prices. But this didn't quite make sense to me. Low prices due to expanded supply indicate a lowering of demand. I've been having a hard time wrapping my head around this dynamic. There is a good article on ethanol imports in Ethanol Producer magazine that gives me some help on this:

High-profile ethanol companies, however, are scaling back their efforts and new plant construction is falling, when compared with 2006. Plant operating margins are squeezed and the supply is exceeding the demand. If there is such an over-abundant domestic supply of ethanol, why are oil companies still looking to purchase the oxygenate from foreign sources?

This is an interesting article in that it illustrates that U.S. companies are still importing low-price ethanol in spite of high tariffs. Apparently, the declining ethanol pricing is slowing the importation and making U.S. ethanol look more attractive. This is a bit strange - lower prices are both helping and hurting U.S. producers. There's three ramifications here that we should take a look at.

Lower Demand Outlook could burst a PE bubble
A lower product demand is a bad omen for this industry. The industry is playing a game of music chairs right now - and the music just stopped. Growing capacity only works when your market prospects are growing. The lowered price coinciding with increasing supply, then, is a strong indicator that the wheels are coming off the ethanol industry. Currently, the U.S. only has enough for around a 5% blend with gasoline (E5). But the industry has projects to double capacity. That's billions of dollars that has been put down that has to be taken off the table (or just lost).

This is a grave situation for the private equity money that has been put into the industry in recent months. These investments are dependent on continued growth through the next decade. If this stall is short term, than it could just slow down the current momentum the industry is enjoying. If the stall is long term, it could really kill development opportunities.

Narrowing production margins indicates new process technology needed
Look, the biofuels industry is a relatively crappy industry. You have relatively high feedstock prices for relatively low end product pricing. You're getting squeezed. So having a low ethanol price - something that a lot of politicians are advocating - is really bad for producers.

What this means is that producers have to step up development of reducing production costs. POET recently announced (rather uninterestingly) that it plans on using waste biomass to produce energy for its plant (using a solid waste fuel boiler). There are increasing need for focus on the distillation process - a significant use of energy within the overall production process. So there is evidence that companies are redoubling their efforts to make their production facilities more efficient. Ultimately, it's one of the few ways they improve their profitability outlook given the pricing risk inherent to the industry.

Cellulosic is mandatory
The biggest impact to this industry is that its future prospects are highly dependent on the commercialization of cellulosic-based feedstocks. Having a cheap, managed, feedstock that can be produced at affordable prices would be a great advantage for this industry. Currently, volume requirements are are limited with corn and, given these changing dynamics, nwe investment dollars would be poorly spent.

Midwest governors push for E85

2007-11-24T11:18:00.000-08:00

RedHerring has a nice piece on a meeting of Midwestern state governors (and the Premier of Manitoba, Canada).

An out-take:

The Midwestern alliance is the first major group to set specific targets for E85, the fuel made from a blend of 85 percent ethanol and 15 percent gasoline. By 2025, they want 33 percent of gas stations, or around 9,700 locations, in the region to offer E85. They also want at least 50 percent of all transportation energy consumed in the region to be supplied by locally produced biofuels, such as ethanol fuel or biodiesel, by 2025.

This is an interesting article, not because of its relevance to the biofuels development to the region.

And just for the sake of rigor, let's see what impact these suggestions would have:
- 27% of greenhouse gas emissions are from this region which we'll assume correlates to 27% of U.S. gasoline consumption: 140 Bil gallons X 27% = 37.8 Billion Gallons of annual demand.
- E85, then, would require ethanol production of 85% * 37.8 Bil Gal/yr = 32.13 Billion Gallons of ethanol/yr.
- We currently produce around 7 Billion gallons in 200 plants. We would need the equivalent of 4.59X the number of plants we have now (around 900+ equivalent plants, which includes expansion of current facilities).

That's a lot of ethanol. It's debatable that the U.S. could produce that much ethanol as it is (meaning, cellulosic would be mandatory just to serve the Midwestern states, let alone the coasts).

The Midwestern states are in bad shape. Michigan and Ohio are particularly in a bad way. I've been in Detroit the last month visiting family for the holidays and the environment is more depressed than I've ever seen. There are "For Sale" signs everywhere. Hardly anyone at the local malls doing holiday shopping. And Quicken Loans moving into downtown Detroit lead the evening news and the national new (such a small event got so much attention). The city counts new job creation just as closely as gas price changes. And it's not getting better.

This big push for expanded biofuels production is really a bet by local government's on developing the region's economies. The front line of all of the country's bad news is in this Midwestern states (real estate, health care, job losses). While there are many who object to the subsidies (corn and blending), and the energy inefficiencies of ethanol, all that doesn't matter to people with no jobs. Last I checked, Michigan's unemployment rate was north of 7%. That's Baghdad crazy. An emerging biofuels industry would be a great boon for the area.

It would also be well deserved. Much of the Big 10 and other local area schools are really pushing some great research into new advanced materials, catalysts, bio-feedstock technology development. Northwestern, Michigan, Michigan State, Iowa, and Wisconsin are all doing breakthrough research. Even schools like Purdue, Ohio State and Penn State have made some very significant break-throughs.

But this desire may be misplaced. The detriments to ethanol as a biofuel (not just its current impact as a fuel additive) are real. The economics aren't really that good right now due to a variety of factors. So while it would be great to make the midwest a haven for biofuels production, betting on biodiesel or E85 might be misplaced. Most notably, there may not be enough ethanol production capacity to meet the desired goals. But more so, the fuel industry is truly a global one. Making a bet on one local market that, unlike petroleum, doesn't utilize the same infrastructure is a tough one for the industry to undertake. And that may be the real end to these governors' stories.

Good Technology

2007-11-20T20:54:00.000-08:00

Superstrong nanotubes
There has been a lot of interest in developing superstrong, long chains of carbon nanotubes. It's one case where the need has exceeded the innovation. Researchers at the University of Cambridge (the one in England) and Natick Soldier Research Development Center (the one in Massachusetts) have made the first discovery of superstrong nanotubes. From the Technology Review article:

These nanotube fibers matched the highest reported strengths for a couple of the strongest commercially available fibers, Zylon and Dyneema, also used in bullet-proof vests. A lone, extremely strong nanotube fiber was off the charts, reaching nine gigapascals of stress--far beyond any other reported material--before breaking. Earlier work with carbon nanotubes has produced fibers that withstand at most three gigapascals.

This is a very important discovery as it is the first step in making some new types of materials available. Most notably carbon fiber bodies for cars, the cable for the space elevator, and bullet-proof sweaters. The latter will sell well in Detroit.

Salt Water Hydrogen
I thought this was a crock when I read about it, but apparently it's getting some attention. Essentially, this scientist at the fully-accredited Pennsylvania State University duplicated the research of some guy from Eria, PA who got a test tube of salt water to ignite by applying radio waves. The theory is that the radio waves somehow strip the hydrogen out of the water molecules. It's the hydrogen that was ignited. This has some interesting implications as a means of generating hydrogen if it can be scaled. The real question to be answered is what the mechanics of this system are and what the yield can be.

Carbon nano...you know what, I don't even understand this one but here it is
From GreenCarCongress:

Researchers at the National Renewable Energy Laboratory (NREL) in Colorado are reporting the first successful electrical connection between hydrogenase enzymes and carbon nanotubes.

In the new study, Michael J. Heben, Paul W. King, and colleagues selected the [FeFe] hydrogenase I (CaHydI) from the anaerobic bacterium Clostridium acetobutylicum. Neither CaHydI nor the SWNTs were specially modified to facilitate formation of complexes. The hydrogenase remains catalytically active so long as anaerobic conditions are maintained.

While I understand the pieces of this research (i.e. fermentation of C. acetobutylicum and SWNT formation), I don't understand what this system's usefulness is. Apparently it has something to do with fuel cell operation. If I had to guess, it sounds as though these researchers found a way to get nanotubes to self-assemble using this hydrogenase complex (with the products of the fermentation as the source of carbon?). This could be very important as there has been no reliable, controllable means of producing nanotubes in any length or reliability. I'm just not figuring out where the fuel-cell aspect comes in.

Pipeline dreams

2007-11-18T16:09:00.000-08:00

Ethanol producers are mulling over building a coast-to-coast pipeline.

See the AP Article.

Paul and Mears estimate a dedicated pipeline would cost about $1 million per mile to build — about $2 billion from the Midwest to the East Coast, where strong markets already exist.

Most existing pipelines move petroleum products from south to north, Mears said. "They don't flow in the right direction — ethanol wants to go the other way," he said.

Moving ethanol through a pipeline would cost 3 cents to 6 cents a gallon, which is at least competitive with existing shipping methods, Mears said.

An ethanol-exclusive pipeline could move more than 4 million gallons of the fuel daily, or the entire production of about 30 average-size ethanol plants, Mears said. That volume, along with government incentives and long-term shipping commitments, would be necessary to support a dedicated pipeline, he said.

There is also another issue. Essentially there is a last-mile problem on both sides of an agricultural pipeline. Whereas oil drilling is localized, farming is not. Moving corn is like moving cement - it's so low value /wt that moving it over a certain distance becomes unprofitable. So it means that the supply side of the biofuels industry has to be made economical with very little capital expense related to transportation.

The airline industry is a good comparison for this. On one hand, we have relatively few large airports serving major markets. At the same time, we have lots of small markets that also serve these larger markets (via regional airlines). This discussion is similar - we're essentially talking about developing a regional airlines model for ethanol distribution.

But here's the kicker. Putting in pipelines isn't that much cheaper for smaller, more dispersed areas (or using our airline comparison, a small regional plane doesn't cost that much less than a 737). This is because putting in a small pipe still takes much of the same planning and labor for putting in a big pipe (the cost of the pipe is relatively small). And therein lies a big barrier. It can be done... but man, those numbers better get better or we're done.

I'd applaud anyone with the courage to back such a project. It would really mean that we're doing this for real.

Bill Ford mad about lack of cellulosic ethanol

2007-11-16T22:08:00.000-08:00

Bill Ford, former CEO of Ford, gave some disappointing words at the progress of cellulosic ethanol at a presentation at the University of Michigan.

Here's a takeaway from the NYTimes article:

“It certainly appeared a year ago that we were going to have a national push on ethanol, and we wanted to have the vehicles ready,” Mr. Ford said. “But we always knew that food-based ethanol would not be the answer. The shift to cellulosic ethanol has been slower than we were led to believe.”
He added: “If we don’t end up with cellulosic ethanol quickly, we are going to hit the wall on ethanol.”

Clearly, Bill is no scientist.

It's a bit of a bad theme in this country about the prospects of technology. We have gotten so used to technological breakthrough being a given, that we mostly only give it a timeline - not the actual credence and uncertainty that are inherent to scientific discovery and commercial development.

Bill is right though. The auto industry really put the cart before the horse on the whole E85 thing. We couldn't nearly had enough ethanol to supply even a nice little niche of the market given current technology. There way too much growth needed to happen in this industry, even without technology barriers. It really seemed, then, that Bill Ford (and perhaps the rest of the auto industry) really jumped the gun on this. Perhaps they're renewed interest in hybrids is a hedge on this bet.

What is missing, however, is an acknowledgment that this technology is harder than most others that human beings have faced. Creating a fuel, altering biology, and turning photons into electricity are deceptively monumental tasks. These are the most basic of engineering questions that human beings have never really been able to extend. Remember, we've known how to make ethanol and biodiesel for decades. We didn't know how to make it economically - and we still don't. (That's the real difficulty - the economics of it all, not so much the "technology", or understanding the science. Or in other words, the science doesn't scale in ways that are consistent with our sense of economy). Now that oil is becoming uneconomical, we're forced to look at alternatives...and there aren't good ones.

Tapping into nature's energy flows is deceptively difficult to make economical. Human beings consume on scales significantly larger than any other animal on earth. Relying on technology to extend this reach will be daunting. We may actually have to change humanity instead.

WSJ Videos from LA Auto Show

2007-11-16T21:53:00.000-08:00

Interview with Bob Lutz of GM

Various "Green"Cars...and Lincoln.

V8 SUV wins green award
http://link.brightcove.com/services/link/bcpid86195573/bclid1312371556/bctid1312369929

...for all the press I give GM, they should pay me some kicks-backs. Unfortunately, I'm not affiliated with them at all (or anyone else for that matter).

FCX Clarity

2007-11-16T17:16:00.000-08:00

Honda unvelied its FCX concept hydrogen fuel cell car as the Honda FCX Clarity at the LA Auto Show. Rumor has it that there will be only around 100 produced - a "beta test" of sorts - and only be available for lease ($600/mo) to a select few customers in Southern California (Santa Monica, Torrance - my old stomping grounds - and Irvine).

(photos by CNet.com)

There are good reasons for the locality of this test. First, proximity to Honda. Honda's USA R&D center is in Torrance, California. It's had a solar-generated hydrogen refuling station at this center for several years that has served their initial FCX concept testers. Second, California has an initiative to develop several hydrogen fueling stations along the entire coast. Southern California has several in the planning stages making refueling more convenient for these users. Third, it's close to Hollywood. Something tells me that someone like, say, Jay Leno or that crazy white-haired guy with the show where he and his wife show off all the sustainability stuff they have on their house. Hey - it's cheap publicity and these people's voices count weather its relevant or not.

It looks very much like the concept vehicle unveiled last year. It sports the more aggressive grill that Honda is putting on its Accord and Civic models. It also has a very nicely equipped interior with upholstery made of sustainable fibers. It's quite the interesting vehicle.

Cool Site: CARMA - Carbon Monitoring website mashup

2007-11-15T21:23:00.000-08:00

CARMA is an interesting web mash-up of Google maps of polluting power plants throughout the world.

http://carma.org/

An intriguing point is the available API. It'll be interesting to see what can be constructed with this application and what insights it may uncover.

Range Fuels starts on new plant

2007-11-15T20:50:00.000-08:00

RangeFuels is breaking ground on their new plant in Georgia. This facility will be their first commercial-scale test of biomass gasification and liquefaction.

Technology Review Article:

The Range Fuels plant, to be located in southeast Georgia, could be producing ethanol as soon as next year. It's being funded by the U.S. Department of Energy (DOE) as part of the agency's effort to increase the use of biofuels. The DOE is providing a total of $76 million to the company for the construction of its new plant. At first, it will produce 20 million gallons, eventually increasing that amount to 100 million.

and goes on to say:

Even if the cost of Range Fuels' plant is twice as much as that of a conventional plant, or $80 million, the DOE is providing the lion's share of the investment--money that Mandich says is "very important" to the success of Range Fuels. Such a heavy dependence on government financing, rather than on private investors, could suggest that commercially viable cellulosic ethanol remains a good way off.

What's interesting about this comment is that it's not all that important. While it's probably not "fair" that Range Fuels gets the "Lion's share" of their plant paid for by the government, they were one of only a handful who were selected as a viable use of the government program to finance cellulosic ethanol projects. So it's still all on the up-and-up in the grand scheme of things - no one is getting kept out of the market because of it. And furthermore, $76 Million isn't all that much money.

I also think the author is incorrect in their $2/gallon capacity number. I actually think it's on the order of $5/gallon of capacity (for their first plant anyways). That would make the price tag around $100Million - $500Million range (Let's say $150 Million). So that's still a lot of money for a venture-backed company to put up. So the risk is properly appropriated to a variety of parties. Without this investment, projects like this would never take place.

Only in America. Only sometimes in Canada.

Good Technology

2007-11-13T19:24:00.000-08:00

More on the PSU Hydrogen Research
I posted an article on the research on hydrogen production done by Penn State a few months ago. A new article describes their novel research in more detail:

The researchers used naturally occurring bacteria in a microbial electrolysis cell with acetic acid – the acid found in vinegar. Acetic acid also is the predominant acid produced by fermentation of glucose or cellulose. The anode was granulated graphite, the cathode was carbon with a platinum catalyst, and they used an off-the-shelf anion exchange membrane. The bacteria consume the acetic acid and release electrons and protons creating up to 0.3 volts. When more than 0.2 volts are added from an outside source, hydrogen gas bubbles up from the liquid.

"This process produces 288 percent more energy in hydrogen than the electrical energy that is added to the process," said Logan.

I'll post more on this research in the future. But it sounds like a very compelling system performance.

Solar cell savings
Researchers in Japan have identified a method for producing solar panels that utilize significantly less silicon. The technology consists of hexagonally-shaped reflecting trays centered with silicon spheres. The innovation comes from the lower usage of silicon.

CV21's solution was to place each of the one-millimeter-diameter silicon spheres in its own hexagonal aluminium reflector. These work like car headlights but in reverse, ensuring that any light hitting the reflector is directed toward the sphere. When this approach is used, even the underside of the sphere is utilized. The hexagonal shape of the reflectors allows them to be slotted together without dead space between them. "Effectively, these are mini-concentrators," says Branz.

Read Technology Review article.

Bioengineered crop for cellulosic biofuels
Sygenta will trial a bioengineered form of corn that naturally produces its own bioconversion enzymes. Currently, breaking down cellulosic materials from corn (stover, etc) requires an expensive, hard-to-make enzyme. This is the primary hurdle for the production of ethanol from non-food feedstocks. Syngenta's crop will produce its own enzymes reducing the cost involved in conversion into a fuel product (or otherwise).
Read the Biopact posting.

What isn't really news

2007-11-12T22:36:00.000-08:00

Most of the research I do on the biofuels and bioproducts industry doesn't end up in this blog. There are many reasons for this - mostly because what I read tends to be a bit more technical (although not as technical as I'd like). I tend to try and comment on things that are popular in the news that, I think, are important to these industries. My commentary tends to try and focus on the economics, technology impact, or misleading press.

But sometimes I omit things because after thinking about them for a while, they're just not that important. Sometimes reading or watching the news is like reading a middle-school newspaper. Some things that get a lot of head lines just aren't that important.

Take the latest one: Al Gore joins Kleiner Perkins Caufield and Byers.

While one would find this a significant movement, it's really not. And for many reasons - not the least of which being that most VCs lose money or make very low returns (I'll let you guess which camp Kleiner falls into). Al Gore isn't an investor - I'm sure he couldn't do one cap table or financial model.

But he is connected to policy-makers - a critically important component to any clean tech venture. But here's the kicker: Kleiner already has access to all the important policy makers.

I'm reminded that Kleiner hired Colin Powell a couple of years back too. And I haven't heard of him since the press release. Something tells me, this is all just a fundvraising publicity stunt. And as far as publicity stunts go, it's a good one. I'm sure they'll get a lot of takers to their fund.

Another favorite of mine to ignore is late stage rounds of funding. A Series C or D is a strange funding round. It means you've hit another important milestone...but you still need money. It's like getting good grades as a senior in high school after you've already gotten into Northwestern. It's nice...but nobody really cares anymore. You just better not fail or you can kiss Northwestern goodbye.

So who hit their later-stage funding? A123 for one. This company has great technology and a laundry list of corporate and VC backers. They just got another $30 mil from their VC backers. But is it news? Not really. News is when they finally get their battery for the Chevy Volt done and delivered.

Hope this helps.

So who's gotten a Series C lately? Well...

Car News

2007-11-12T22:04:00.001-08:00

Hybrid Escalade
Yes, even rappers can be just a little more environmentally helpful. The 2009 Escalade Hybrid will use the same 2-Mode system that the Hybrid Tahoe/Yukon. It promises to improve overall fuel efficiency by 25%.
See Car & Driver Article.

Like the Tahoe and Yukon gas-electrics, the Escalade hybrid will be a two-mode hybrid that supplements GM’s venerable 6.0-liter V-8 with power from two electric motors. At low speeds, the vehicle can run on batteries only, the engine only, or a combination of both. At higher speeds, another operating mode engages the electric motors and the cylinder deactivation system for more efficient operation. GM claims that harmful emissions will drop significantly, and fuel economy will be boosted by some 25 percent compared with utes equipped with the 5.3-liter V-8. The fuel-economy disparity with the standard Escalade, which comes with the gluttonous 403-hp, 6.2-liter V-8, should be even more significant.

International Truck and Engine begins making Hybrids
From the Press Release:

The road to a better environment will now include greener commercial vehicles. International Truck and Engine Corporation, a Navistar company (OTC: NAVZ), announced today that it is the first company to enter line production of hybrid commercial trucks. As diesel fuel prices continue their volatility and engine emissions requirements tighten, International Truck and Engine is now producing the International® DuraStar™ Hybrid, a diesel hybrid electric medium-duty truck that provides customers with improved fuel efficiency and reduced engine emissions.

This is another sign that companies are betting on hybrids being commercially viable options. Unlike with passenger cars, commercial trucks are purchased specifically for the cost advantages with fuel economy being high on the list. This move is a welcome vote of confidence for commercially producing and supporting hybrid technology.

CNet Video on Biodiesel
An interesting CNet video on the production of biodiesel.

CARB sues EPA

2007-11-12T13:33:00.000-08:00

California Governor Arnold Schwarzenegger and State Attorney General Edmond Brown, Jr. are suing the US Environmental Protection Agency for failing to regulate green house gas emissions from motor vehicles.

From the press release:

“Despite the mounting dangers of global warming, the EPA has delayed and ignored California’s right to impose stricter environmental standards,” Attorney General Brown told a news conference at the state capitol with Governor Schwarzenegger and California Air Resources Board chair, Mary Nichols. “We have waited two years and the Supreme Court has ruled in our favor. What is the EPA waiting for?” Brown asked.

The ruling refers to the April Supreme Court ruling noting that it was constitutional for the EPA to regulate motor vehicle emissions. This was a very under-reported event in the media, but carriers very significant weight (TV personality Jim Cramer even called this event "Green Day" on his cable show and dedicated an entire week of programming to stocks that would be effected). This lawsuit underscores how serious the matter is (it too is being under-reported).

I wrote a post a while back about who is showing leadership in this struggle to curtail/eliminate the threat of global warming. The government of California (including Schwarzenegger) and the California Air Resources Board have, rather militantly, pushed for real policy change in air regulation. California is suffering from real, present-day threats from pollution and global warming and see it as an immediate imperative. Hopefully, this lawsuit will garner some action from the Feds. But something tells me that nothing really comprehensive will come out until January 2009.

What's going on at VeraSun?

2007-11-11T21:19:00.000-08:00

VeraSun reported last month that they were delaying construction of their Reynolds, Indiana facility. This is in stark contrast to their release in July stating their plan to drive their available capacity to 100MM Gal/year. The reasons posted in their press release, then, seem a little sketchy and don't quite make sense.

“We believe it’s important to be mindful of the current market conditions and manage our business accordingly,” said Danny Herron, VeraSun Chief Financial Officer and Senior Vice President. “Given the abrupt change in market conditions that have seen ethanol prices drop nearly 50 cents per gallon in the last 60 days, it is prudent for us to adjust our current pace of expansion. Due to Reynold’s early stage of development, we believe it is wise to suspend investment until the market provides an acceptable return.”

Market conditions? Fluctuating product pricing is the name of the game in this industry. When the hell do you stop the construction of a new, efficient, production plant (with a 30 year life span) because the current prices are a bit too low at the moment?

VeraSun has touted itself as the "low cost" producer of ethanol. So shouldn't their operations reflect this strategic push? VeraSun could not have this strategic stance without knowing how to manage its growth strategy while mitigating price fluctuations. This is certainly the type of contingency that they should have planned for. Building a plant is a long-term decision. So this action, then, could not be due to a short-term drop in prices. There's something more here.

VeraSun has some smart people running it. They should have known that high corn demand would drive up prices and that expanding capacity would lower the price of ethanol. The missing piece here is that this movement assumes that fuel demand will be flat or decreasing over the next, say, five years. And that's what is strange. If this assumption is true, then many ethanol plants would need to shut down - presumably the least efficient - not just stopping this one facility. In fact, it would make more sense to finish this plant now (assuming it's the most cost efficient from a technology standpoint) and shut down one of their least efficient facilities if it's just a capacity issue. So from a rather basic economic perspective, this movement doesn't quite make sense.

So it seems to me that this cessation of the construction of the plant is not because of low ethanol prices. So I would speculate that one (or some combination of all) of the following is the real reason:

(1) There is an issue pertinent to the local market/politics, etc that have made finishing this plant difficult

(2) VeraSun is running short on money and is trying to save a little bit

(3) VeraSun is planning to test/install a better technology in this facility that isn't quite ready yet.

(4) Construction materials (materials, people, and equipment) are harder to come by and are raising construction prices.

Personally, I hope that it's #3. It would explain the level of subterfuge in this press release, but also give some hope for the company.

But we'll see.

And in full disclosure, I don't own any VeraSun stock and don't plan to in the near future.

Mascoma buys Celsys

2007-11-10T08:18:00.001-08:00

Mascoma recently announced their purchase of Celsys Biofuels, a cellulosic ethanol R&D company in Indiana. Celsys was founded in 2006 as a commercialization effort for research done by Professor Michael Ladisch at Purdue University and the Laboratory of Renewable Resources Engineering.

Read Press Release.

This acquisition seems to be aimed at two factors. The first is the attraction of Dr. Ladisch to Macoma's executive team (CTO). Given the already pretty strong star power on the Board of Directors and Exec team, Dr. Ladisch must be very well appreciated by their company.

The second attraction seems to be the IP that Celsys has access to. The Press Release notes:

The Celsys technology is based on proprietary pretreatment processes for multiple biomass feedstocks, including corn fiber and distiller grains.

That's pretty big implications actually.

But this acquisition seems to be blown out of proportion - it's getting a ton of press. The acquisition seems to be consistent with Mascoma's integrated processing platform that Lee Lynd has been advocating. But given that Mascoma isn't making a lot of money yet, and they've only raised in the tens of millions, we can assume that this purchase wasn't for a high dollar amount (say a couple million). Is this premature?

It seems to me that the this acquisition was more of a move to get Dr. Landisch on their team than acquire their IP. Their IP, if it can really do what they're implying (pre-processing of multiple feedstocks into something more manageable for fermentation), it's worth way more than a couple million bucks. So Landisch, if he was really trying to get top shareholder value, should have waited another year so the price would have been at least $50million.

So good for Mascoma and Celsys.

Canadian Team wins MIT contest

2007-11-08T20:57:00.000-08:00

A team from Alberta recently won an MIT contest. Their projects focused on introducing genes from Clostridium acetobutylicum into E. Coli.

Read Press Release
Read GreenCarCongress Article

This is an interesting approach. On the one hand, E. Coli is well known and is used widely in industry. So using a genetic modification to introduce into E. Coli is a good strategy. The strange thing is that C. Acetobutylicum is also very well known. Essentially, this bacteria naturally produces butyric acid (easily turned into butanol), acetone, and ethanol. Taking the butanol-helpful genes and put them into E. Coli does make sense, but it seems like a way to turn a lemon into a lime: "Ok, but why?" Is there an efficiency gain? Does this method give a better fermentation yield than, say, altering the genes in C. Acetobutylicum directly?

There are other groups that are trying to commercialize a process based on a modification of C. Acetobutylicum (Gevo being the most notable). While these are clearly interesting pathways for producing butanol, they are also a long way away from being viable overall.

Ford and Chrysler projects

2007-11-07T22:21:00.000-08:00

I've given a lot of publicity to GM's FuelCell E-flex vehicle. But I haven't given equal billing to Ford or Chrysler. So here's some propaganda on some projects they're working on:

Ford HySeries (with a mention of their hybrid E85 vehicle)

Please note its driving in the snow.

Chrysler Hygenius concept car

Good Technology

2007-11-07T09:32:00.000-08:00

CMU Wins latest DARPA Challenge
The team from Carnegie Mellon won the latest DARPA Grand Challenge. This challenge focused on building an autonomous car/truck that could navigate an urban setting (without catastrophe). The team from Stanford finished second and Virginia Tech third.
Read TechnologyReview's Article.

Friction Reduction
Research led by scientists at the University of Pennsylvania has shown that changing the mass of atoms at the interface of two sliding bodies will reduce the resulting friction. This is significant as it gives, albeit incremental, improved energy efficiency with bodies in contact with each other. Much of the energy processed by an internal combustion engine is lost due to friction. This research may provide engine designers with additional data on how to design more efficient engines.

Sorry, but that's all I've got. Innovations seems to be rather slow as of late. This is a bit disparaging as there needs to be a lot of new innovations in order to induce the changes we are all hoping for. Much of the news is filled with start-ups raising more money. But much of these are Series B or later - not Series A bets on new technology. I hope this is not a sign of things to come.

1.2 Million Hybrids from Toyota to date

2007-11-05T19:52:00.000-08:00

GreenCarCongress is reporting that Toyota has sold 1.2 Million hybrids (72% being the Prius) since 1997 (image above from Green Car Congress).

Read GCC Article.

It's not quite clear to me that this is a success.

On one hand, a million cars on the road is a good metric for a line of cars. A million in 10 years isn't shabby. (We should also note that only about 70% of these are sold in North America so let's say 850,000 units in the U.S. and mostly in the last 5 years). But given the steadily increasing cost of gasoline matched with the amount of press around these vehicles (both good press for Toyota and bad press for GM), one would think they would be more popular. So it begs the question as to what inherent value they provide.

On one hand, the mileage they get is really great. A friend of mine who has to service multiple locations throughout California's central valley just bought one and is seeing real dividends (other than the cramped space - he's 6'6"). But he's also married with three kids and every dollar saved is a big help. My roommate has one - he works 5 minutes away (although he has a new girlfriend in Berkeley so he's starting to rack up the miles). The people who bought the $3.5Million eco-efficient house around the corner have one. In fact, everyone I know who has one makes over (or close to) $100k/yr.

So the picture that is painted for me is that these cars are purchased as consciousness investments (people who want to live "green") or people who notice really big savings from it. But this seems like a fairly narrow segment of the population. So while they're certainly a good technology, they don't seem to really meet the needs of most of the (U.S.) population.

So it'll be interesting to compare notes for PHEVs and the Hybrid Tahoe/Yukon when they are released to the marketplace. I have already put the challenge out - Put 1 Million PHEVs on the road in 5 years and I will change my opinion on them. But if the "success" of the Prius is any guide, they certainly will not be the big win that car owners need in order to mitigate their environmental impact and still meet their personal wants/needs.

Port of LA looking at old-truck ban

2007-11-04T19:41:00.000-08:00

The Port of LA, one of the World's largest shipping facilities, is considering a phased ban of old, polluting trucks from its facilities.

From the report:

The proposed tariff language specifies that, beginning October 10, 2008, the Ports would reduce harmful emissions at the Port terminals by denying access to older trucks according to a progressive ban by model year scheduled over the five-year Clean Trucks Program schedule. The schedule for the progressive ban is as follows:

• Ban pre-1989 trucks from Port service by October 1, 2008
• Ban 1989-1993 trucks from Port service by January 1, 2010
• Ban unretrofitted 1994-2003 trucks from Port service by January 1, 2010
• Ban pre-2007 trucks from Port service by January 1, 2012

The tariff would not apply to “Dedicated Use Vehicles,” defined in the tariff as On-Road Vehicles that do not have separate tractors and trailers, including auto transports, fuel delivery vehicles, concrete mixers; mobile cranes and construction equipment.

This is an extraordinary measure. The ports have long made bold moves to reduce air pollution. This one, however, would have a drastic impact on the shipping industry on the west coast. According to Wikipedia, the Port of LA handles around 3.8 Million containers. That could amount to tens of thousands of individual trucks that enter the ports on any particular day. The impact, over time, could be the need to replace/upgrade all trucks that service these ports. If other ports around the country (Oakland, New Orleans, New York) follow suit, then this could be a big shock to the trucking industry (both positive and negative).

The opportunity here, would be to provide the most fuel efficient trucks to companies with fleets on the west coast. If some of the new developments that fleets are taking - Wal-Mart in particular - then this could be, in the long run, a great opportunity. But it could be a shaky transition if it becomes more widely accepted.

UN report proposes moritorium on food-based biofuels

2007-11-02T21:12:00.000-07:00

Jean Ziegler, UN Special Rapporteur, recently submitted a report suggesting a moratorium on the building of food-based biofuels production plants due to their potential danger to food going to the developing world.

Read the report.

A little snippet:

The Special Rapporteur is gravely concerned that biofuels will bring hunger in their wake. The sudden, ill-conceived, rush to convert food — such as maize, wheat, sugar and palm oil — into fuels is a recipe for disaster. There are serious risks of creating a battle between food and fuel that will leave the poor and hungry in developing countries at the mercy of rapidly rising prices for food, land and water. If agro-industrial methods are pursued to turn food into fuel, then there are risks that unemployment and violations of the right to food may result, unless specific measures are put in place to ensure that biofuels contribute to the development of small-scale peasant and family farming. Instead of using food crops, biofuels should be made from non-food plants and agricultural wastes, reducing competition for food, land and water.

Like other energy bloggers, I tend to agree with the sentiment of this statement. But moreover, I'm a little disgusted by it because in taking a very strong stance against this one issue, it dilutes the overall reality facing famine and hunger throughout the world (in my own opinion at least).

The report speaks of people fleeing across borders due to reasons of famine and being extradited, shot, or otherwise mistreated. This seems like a really different set of circumstances than those related to famine. In fact, it's quite surprising that this is the argument that is being made. So it doesn't seem realistic to look at them solely in this context (why are they shooting people on the Moroccan border anyways? Even the U.S. doesn't do that to Mexican immigrants).

The world produces enough food to feed everyone and more. The reason we don't feed everyone, then, is because we don't want to. We have other interests that are, apparently, "more important". Food programs in many countries are foiled by many forces - government corruption, militia groups who takes the food at gunpoint, etc. At the same time, large companies - oil, diamonds, art, wild game - have been stripping the developing world of their resources for decades. When it comes to getting oil, deals are made (see China in the Sudan signing oil supply deals); when violence, pestilence, and famine are present, they go unsupported (see the mass slaughter of people in Darfur and the massive amounts of refugees to the surrounding region). So the end result is that the developing world still struggles with poverty because the rich world (not to mention the citizens of the developing world) tolerates the corruption and violence that takes place in them and only takes action when it is in their own interest (this is of course, foolish on the part of rich nations as this instability will increasingly add uncertainty in all parts of the world).

This report takes a rather naive perspective on this issue. It seems to present this case as being new, powerful, and relevant. But it is an old one that is just as relevant now as it was 50 years ago. But what would the UN be without a good debate on world hunger. Perhaps updating it with the biofuels issue is just the stamp of modernity thrown in. But it seems to be a rather ineffective document in its current form which is rather disappointing. This is a serious issue that needs to be addressed just as seriously.

So I think the moritorium on food-based biofuels is a bad one only because it is being used as a red herring. While it is true that non-food biofuels would be incrementally better for world hunger, the world isn't hungry because there are biofuels. Biofuels actually present a great opportunity for developing nations to develop wealth through trading in the global market; a moratorium would destroy that market opportunity. This suggestion, then, is only a convenient scapegoat that allows this UN leader to ignore his moral responsibility in battling the forces that create this reality within the world at large. This might require more than just a well-written report. It may take some economic sanctions and some guns to get it right. But that's just my own opinion.

This is why using "it hurts poor people" as a detraction to biofuels is a real hot-button for me. I've seen poverty first hand growing up (yes, even in the U.S.). And when, you're poor, there's no bigger reality than "rich people don't care...they have all that money and power and don't do anything about us...they must not care..." So for the rich to say we shouldn't do something because it hurts the poor seems hypocritical - they don't help the poor. And rich nations confirm this reality with their inaction. Poverty in the U.S. is masked by statistics ("4.5% unemployment rate" or "4.8% GDP growth"). But when you're poor, hungry, or sick, it's 100%. And if rich people can't/won't do something to help, then the poor will do as it will to survive - including turning soy beans into biofuels... or growing cocaine. Either we do something about it...or live with the consequences. Here we are.

Project Better Place: a bad omen

2007-10-29T16:44:00.000-07:00

Project Better Place launched today to a lot of press and fanfare. This company is developing an infrastructure for electric cars. The model is purportedly similar to the cell phone model - PBP builds a charging infrastructure around town and you pay a service to utilize this infrastructure. CEO Shai Aggassi (former SAP hotshot here in the valley), was able to raise $200 Million (from a CNBC interview) for this venture in just a few weeks.

Listen to the launch presentation.

But maybe I'm crazy, but I find all of this attention troublesome.

Claims not as exciting as claimed
The claims that Aggassi makes in his presentation are the standard-issue ones posed by electric-car enthusiasts. But the reality is, they're very narrow-minded. He asserts that transmitting electrons is more affective than moving gasoline molecules. But this really isn't true for two reasons. First, no battery can hold as much energy as fuel in a given amount of volume (and there are thermodynamic reasons why this will always be true). Second, electricity production and transmission is horribly inefficient - again for thermodynamic reasons having to do with using copper wires. Imagine losing 9 gallons of gas to every 1 that you pull out of the ground - that's electricity production. And there's still the notion that we don't really make that much clean electricity in this country - so the notion of it being a "clean-tech" idea is only tangential. So while his points are true, they're not compelling.

Batteries aren't easy
The company's battery leasing strategy sounds fine (provided an electric-car industry can be developed).

Aggassi points out that the business they're proposing is similar to the cell phone model. That's an interesting analogy. I don't recall people being particularly happy using a battery with their cell phones. Battery life is the biggest issue in all of technology - and this company is proposing we use a battery with one of the most important technology in our lives (our cars). That sounds ludicrous.

Short-sighted
With all the press that PHEVs and electric cars, are getting, none of these silicon valley developers have ever sold a car. I mean, get on a lot and convince some 35 yr old mom that she should buy your car. This is one of the hardest sales in business. I think these companies are very short-sighted in their assumption of what can sell a car.

Cost, Fuel efficiency, and "green-ness" is not at the top of everyone's list. While hybrids are the fastest growing car segment, cars aren't really growing that fast to begin with. So while fuel efficiency is certainly a good feature, people aren't really changing their behavior for it - not enough to really make a dent in fuel demand anyways.

A Honda Accord with 30 MPG is still pretty economical on fuel consumption. And an expensive Cadillac Escalade or a BMW 5-series still gets you chicks. While I'm sure hybrid sales are growing faster than the Ford F150, they're not selling nearly as many units (i.e. it's a distortion of the law of large numbers). So it's speculative at best to think that consumers will really embrace an electric car on these grounds. That could really be a problem for this type of a venture.

Fundraising is very unsettling
$200 Million in 3 months? For a company that claims that it has no proprietary technology-platform? That is ridiculous. But understandable if you've been around Silicon Valley long enough.

Silicon Valley is just as fake as Los Angeles. Being a VC in this town is like being a Producer down south. A hot CEO is like a hot actor. The dirty little secret here is that most VC funds don't make money (only a few noteworthy ones have). And many hot-shot CEOs are more lucky than visionary. There are only a few core people who are really quality around here. But none of this necessarily translates into success.

Vinod Khosla (as part of KPCB) was a lead investor in Zaplet, a horrible internet failure from the bubble era. This company raised more than $90 Million in VC funding. Benchmark Capital invested in eBay (after it was already profitable)...but it also invested in WebVan - a horrible mess of an internet failure (actually they made money off that deal - everyone else go hosed). So a big VC fundraising round doesn't necessarily mean that it's a good idea so much as it has captivated a particular investor.

But this is understandable. VCs have raised a LOT of money in the last several years. And they need to get rid of it. If you have $1Billion and you need big investments to back. Which means big ideas with big assets tied to them. The internet used to serve this need (servers and storage were expensive; unfortunately so were customers). The clean-tech industry fits this need well. This company is a big asset roll-out. So it makes sense that they would be able to raise this kind of money. But it's also a sign that they don't have anything better to invest in.

So good luck to Shai and his team. He'll need it.

Nice CNN piece on GM's Project Driveway

2007-10-27T00:43:00.000-07:00

CNN has a nice piece on GM's Project Driveway. It gives more detail on the Chevy Equinox and some of their fuel cell technologies.

A quick excerpt:

Hydrogen fuel cell supporters counter that fuel cells are much more efficient than internal combustion engines, so less hydrogen is needed than an equivalent amount of gasoline. Also, electrical generators are much more efficient, so getting power from electricity - whether its by plugging into an outlet or separating hydrogen - is a big improvement over internal combustion.

CNBC Interview with US BioEnergy CEO

2007-10-26T16:01:00.000-07:00

BioEnergy CEO

Good Technology

2007-10-25T23:19:00.000-07:00

Metal/Polymer Hybrid; Lightweight and Strong
DuPont and Morph Technologies have formed an alliance to commercialize a metal-polymer hybrid material. This material will have the strength and stiffness of a metal and the flexibility and light weight of thermoplastics. This sounds like a really innovative product that could have great applications in underweighting vehicles or other products (like my big television).

DOE's Entrepreneur-In-Residence Program
The Entrepreneur in Residence (EIR) Program will bring venture capital sponsored entrepreneurs into three of DOE’s National Laboratories to develop plans to commercialize new clean energy technologies. The entrepreneurs in residence will identify technologies that, when commercialized in private sector companies, will contribute to DOE’s mission to promote America’s energy security through reliable, clean, and affordable energy.

This sounds like a great opportunity to commercialize a new technology. But it also sounds like deal flow for VCs. I'm not certain that this will be managed equitably.

Power from Space?
The National Security Space Office is soliciting technical experts to devise a means of generating (and presumably transporting) electricity from space-based collectors. This is really out there type of thinking. But then again, that's what gets our juices going. This could certainly address the collection efficiency issue, but the transference back to earth would be the real difficulty. But it's possible, I think. There are a couple of different methods that could be utilized and it might be a great opportunity if feasible.

CIBC promotes propaganda...

2007-10-23T23:13:00.000-07:00

GreenCarCongress noted a CIBC report with some harsh words about the ethanol industry. As I've noted before in previous blogs, most of their claims are either not significant or consistent with the broader political agenda. The strange thing, though, is that CIBC claims to be a credible source of information for investors. But this report is just crap - not rigorous and makes claims without any context to their real significance.

Let's take a look:

"Not Energy Efficient"

The key reason is the huge amount of energy that is required in first growing and harvesting the corn, transporting it to the distiller, distilling the ground cornmeal into ethanol and then transporting it by truck and train to users across the country. These more costly transportation methods are required because ethanol cannot be transported in conventional pipelines.

I've already argued against this point in previous posts. But I'll just re-iterate. If this data point is true, then the market should force these companies out of business. If the transportation costs were really that high, you couldn't run these businesses profitably. If you look at their financial statements, many of them are profitable, even net of government subsidies (and if the government wants to give subsidies to these companies so be it; the people run the government, not financial markets). If this company really believes in the market forces winning out over time, then this point wouldn't apply. Which gives the impression that there' s another agenda behind this press release.

Energy efficiency doesn't matter. This argument could be used for, say, Sony Playstations or iPhones. Again, if the high price of energy was significant, these companies wouldn't be profitable (and wouldn't survive).

What this point is really saying is that ethanol is a carrier for natural gas and the small amount of diesel needed to transport it to blending locations. So instead of using foreign gasoline, we're using domestic natural gas. I'm fine with that.

Gasoline with a small % of ethanol can go in pipelines; so their transportation impact points aren't reflective of the overall transportation network. It's not as expensive or difficult as they're insinuating.

And lastly, we don't make much ethanol in this company - only enough to be a replacement for MTBE. So their "the sky is falling" message seems foolish. There isn't enough ethanol being produced for it to be a real problem for our markets. The real concern is managing how it will grow and change in the future. And I don't think the finance guys can think 4th dimensionally (meaning what we do now is not what we will do in the future; the market is very aware of this reality and is planning accordingly).

Corn prices hurt food prices?

"In the last two years corn prices have jumped by 60 per cent. Soaring corn prices not only pass directly into animal feed costs and corn-based food prices like tortillas, but they are spilling over to other grain prices as farmers scramble to expand corn production at the expense of other crops. Grain prices are the strongest they have been in memory while global inventories continue to shrink to record lows."

This is true, but not importance. Or in other words, it's fear-mongering.

Last time I checked, high tortilla costs aren't going to bring down the U.S. economy. And the cost of corn flakes, even at sky-high corn prices, aren't nearly as expensive as the plastic bag or the printing on the box. So the point is true, but moot.

Hurts Poor People?

He notes that while accounting for less than 15 per cent of the consumer price index, food represents one of the least substitutable areas of consumer demand. For low income Americans, food costs represent nearly 40 per cent of monthly budgets.

Food doesn't cost more than gas or rent in most areas. So if their math is right, poor people very modest transportation, energy, or housing expenses. The only way that math works out is if people are too poor to afford transportation or decent housing (let alone home ownership). These are *real* social problems - not noticably higher prices for tortilla and corn flakes.

This argument really pisses me off. I grew in and around poor neighborhoods. And last time I checked, there were no CIBC checks showing up in people's mailboxes trying to help make ends me. So the notion of using "it hurts poor people" is a abhorrent and inexcusable. It's garbage and CIBC should be publically admonished for making such a claim.

So the tone of this press release is very strange. It's all innuendo and hearsay. There's no real rigorousness or context behind its claims. It seems to reiterate the bad press that ethanol gets (all from people who I'm sure never passed high school chemistry, let alone be competent enough to evaluate the energy industry). It's a big disappointment and reflects negatively on their company.

Updated RFS bill proposed

2007-10-23T00:31:00.000-07:00

Senators Obama (D-IL) and Harkin (D-IA) have introduced a bill to increase the renewable fuels standards. The bill would "require the production of 18 billion gallons of renewable fuels by 2016 including 3 billion gallons of advanced biofuels, such as cellulosic ethanol".

From the Press Release:

Despite a boom in production of ethanol by small plants across the country, most consumers around the country have been unable to fill up their cars and trucks with E85 gasoline because of problems in the distribution of ethanol and obstacles to greater ethanol distribution by oil companies. The average spot market price for ethanol has dropped 30 percent over the past six months. With ethanol prices dropping this severely, according to the New York Times, "there is likely to be a sweeping consolidation of the industry, and some small companies could go out of business."

It's hard to figure out where this is coming from. Obviously, Obama is trying to win votes in Iowa. Appealing to the small ethanol producer is admirable - but these producers won't be able to stay in business much longer regardless given the cost advantages the larger players bring. That not withstanding, this doesn't seem very significant legislation. I say this because there are a few dynamics that this legislation suggests that are contrary to what the reality is (at least, the 'reality' according to me).

First, industry is driving the adoption of ethanol. At current production volumes (pushing 7Billion gallons/yr), we are only looking at ethanol as an additive for gasoline - not a real alternative fuel. E85 hasn't taken off because there isn't enough ethanol to produce enough E85 in a reasonable fashion. If we used all the ethanol we produce now for E85, then it would only be 8.2 Billion gallons of E85 for sale. That's barely enough fuel for a small state, let alone broad market availability. So the notion that E85 hasn't been adopted because of distribution is a farce. It's simply a supply issue. All the industry-points seem very unrelated - so I don't see how they should illustrate the context for pushing for this amendment.

Second, the real test of the ethanol industry isn't legislation, but rather will there be enough ethanol to supply. At some point around the 15 Billion gallon/yr stage we will be topping out of our ethanol production possibility using our current methods (ethanol from corn via starch fermentation). Further, 3 Billion gallons of cellulosic ethanol by 2016 is a bit of wishful thinking at the moment - there's a lot of engineering that needs to be done to prove current methodologies appropriate. This being the presumed situation, there's nothing saying that industry will want to put more than 10% ethanol into the fuel supply. If industry is going to keep pushing for ethanol or other alternative fuels, then the only real barrier is weather or not the oil companies - the ones with all the gas stations and refinery blending capacity - will want to market ethanol-heavy products or not.

So the only real reason to have legislation is to force the hand of the oil companies. Ok. This legislation doesn't have language in it that suggests that is the need. But it also doesn't seem to go far enough if that's its objectives. The industry can get to 18 Billion gallons by 2016 on its own if necessary. More realistically would be 2020 just to get through all the industry-related logistical bumps (i.e. making sure there are enough trucks and trains to transport 2X the ethanol we have today, etc.).

So it begs the question why suggest this legislation at all. As opposed to something way more far reaching than the current RFS standards are suggesting.

Very strange.

Kansas may bleed again over carbon

2007-10-19T19:22:00.000-07:00

CNN is reporting that a Kansas administrator has rejected permits for two coal plants.

Read CNN Article.

The Thursday decision by Rod Bremby, secretary of health and environment, prevents Sunflower Electric Power Corp. from starting construction on a $3.6 billion project outside Holcomb. The utility is expected to challenge the ruling.

and goes on to say:

Bremby noted that in April, the U.S. Supreme Court ruled that carbon dioxide was a pollutant regulated by the federal Clean Air Act.
He called his decision a step toward addressing carbon dioxide and promised that the Department of Health and Environment will work with officials in different industries to develop goals for reducing CO2 emissions.

This is a significant act by Kansas and should escalate a debate across the region about the impact of carbon emissions. The state of California has taken some preliminary steps to de-carbon its electricity. But this is the first real line-in-the-sand that any large government has made in saying 'no' to carbon emissions.

Of course, the politicians are up in arms about it.

Supporters of the plant including House Speaker Melvin Neufeld and Senate President Steve Morris, saw the project as vital economic development for rural Kansas. Some Republicans accused Bremby, an appointee, of knuckling under to political pressure from his boss, Democratic Gov. Kathleen Sebelius, and exceeding his authority.
"The Legislature will clearly have to look into how a cabinet officer can exceed his authority with impunity," said GOP Sen. Jay Emler, chairman of the Senate Utilities Committee.
Finney County Democratic Party chairman Lon Wartman resigned in disgust, calling the state party's leaders "despicable" in an e-mail to reporters.

But they should note that farmers are seeing the affects of global warming first hand. This could be one of the most significant moral and economic events that the state of Kansas has made since the 1954 Kansas-Nebraska Act and the violence that followed.

Interesting audio podcast from PodTech.

2007-10-19T16:50:00.000-07:00

Interesting podcast on GM's Project Driveway. It features a ride and drive with a fuel cell Chevy Equinox.

http://www.podtech.net/home/4406/ride-drive-chevys-equinox-fuel-cell-vehicle

Half of NatureWorks gets bought by Japanese

2007-10-19T02:11:00.000-07:00

Japanese Teijin to purchase 50% stake in Cargill's Natureworks subsidiary.

Press Release.

“Teijin's downstream application knowledge in fibers, films and plastic compounds will be of immeasurable value as we grow production at our Blair, Nebraska facility and consider additional expansion in the fast-growing global marketplace,” said Cargill Vice Chairman Guillaume Bastiaens. “NatureWorks will greatly benefit from Teijin’s expertise in technology and end-use application development. Teaming up with Teijin will allow more brand owners, retailers and converters to address their global interest in sustainable solutions using NatureWorks biopolymer.”

and goes on to say...

“We are very impressed with Cargill’s long-term commitment to NatureWorks PLA polymers and other biobased products,” said Toru Nagashima, president and CEO of Teijin. “NatureWorks LLC is a perfect fit with our strategy of pursuing strategic investments to take our environmental management technologies global. We look forward to growing our global PLA polymer business through this partnership.”

Hmm....

This doesn't make sense to me. While NatureWorks is clearly a success, Cargill, of all companies, doesn't need to partner with anybody to develop the technology, capacity, or global reach for any of its product lines. It's one of the largest companies on the planet and has interests all over the globe. So what's with selling half the house?

It's hard to evaluate from this - it's not a bad deal regardless of my skepticism. But 50%?! Of a great, growing business? But it doesn't make sense given the reputations of both firms and the size of NatureWorks (it's not a big company by most measures). So it seems that there is more going on with this relationship that is being let on.

Hydrive embarks on big beta test

2007-10-17T01:11:00.000-07:00

HyDrive Technologies announced a testing program to install its hydrogen production systems on 100 big rigs.

Read Press Release.

Under the program, each unit installed will be equipped with a PeopleNet(TM) system. This system is capable of tracking mileage to the tenth of a gallon and controlling the data for variables such as excess idle times, truck speed, and elevated RPM's. Monitored results will provide the Company with a significant level of statistically verifiable field data on HGS performance and will complement other ongoing lab testing work as part of the previously announced overall product review. This should allow the Company to validate HGS product performance on various engine types, thus setting the stage for a larger product rollout strategy.

Hydrive Technologies is developing an on-board hydrogen production system to make the internal combustion engines on big trucks more efficient and cleaner. According to its website, the system creates hydrogen on-demand - no gases are stored on board. Apparently it stores only 1.8 L of water, but lasts for 4500 miles.

Apparently, it works fairly incrementally to improve efficiency:

When the HGS is connected, small amounts of injected hydrogen gas mix with the diesel charge. As hydrogen burns 10 times faster than diesel it has the effect of speeding up the combustion process. This allows the fuel to be burnt more efficiently at the top of the stroke, resulting in increased combustion efficiency, lower emissions and improved economy.

I'm not sure if this is a good idea or not. While if this process improves efficiency only a few percent, then it still might be a good investment for truck drivers (they'll take any help they can get). But only a technology that makes a big improvement - say 30% - will really become a big hitter. Getting a 30% reduction in fuel economy from a box filled with water would be one of the biggest things to hit the trucking industry since...rubber tires. But these tests should show the real value of this device (if HyDrive's money can hold out).

Genencor gets in the game...

2007-10-16T01:16:00.000-07:00

Genencor announced its first cellulosic ethanol enzyme.

Read the press release:

Accellerase™ 1000 is the first in what the company expects to be a family of products tailored to different biomass feedstocks and system conditions. The key features that are expected to be important at commercial scale are already built into this first product.

It reports the following features and benefits:

Enhanced saccharification performance on a variety of feedstocks.
Ability to operate in simultaneous saccharification and fermentation (SSF) processes, two step sequential hydrolysis and fermentation (SHF) processes or hybrids of the two.
High ß-glucosidase activity to minimize residual cellobiose, which may lead to a higher saccharification and ultimately to a faster ethanol fermentation. Yields may also be improved.
Unclarified product. The remaining nutrients from enzyme production are available to the yeast in addition to the fermentable sugars produced by saccharification.
Minimal formulation to ensure that enzyme formulation chemicals do not interfere with saccharification carbohydrate profile analysis or subsequent yeast fermentation.

A look at Tesla's numbers

2007-10-12T23:40:00.001-07:00

Tesla Motors is finally getting some final performance specs on its roadster. Let's take a look at how some of those numbers impact an owner.

Tesla is reporting some of the following performance numbers:
- $0.02/mile
- 245 mile range (from testing)
- 135 mpg equivalent

In seeing these numbers, I would want to know two things:
1) How much does one charge cost? (or in gasoline terms, how much to fill up the tank)?
2) How much electricity does it use (what should I see on my electric bill)

1. How much does one charge cost?
It's not clear to me where these numbers comes from. If I were guessing, they probably came from a measurement of the amount of electricity it takes to charge the vehicle.

If you assume $0.02 / mile * 245 miles / charge, then one charge costs $4.90.

2. How much Electricity does it use?
Well... I live in a house in Palo Alto, California. Overall, our power rate is around $0.11/kWh. This is one of the highest in the nation (Hawaii can get to around $0.18/kWh. Florida can get around $0.08/kWh).

So at $4.90/charge and $0.11/kWh ($4.90 / $0.11) gives 44.5 kWh/charge.

My current consumption (in my home in California) is around 463 kWh / month.

So if I had to charge 10 times / month. This is a reasonable assumption - around 2450 miles / month driving if it were my everyday car (actually, given the price tag, I would be living in it). At this rate, my electric bill would double. But...if you can afford a $100 car, then paying $80+/month in electricity bill is very well worth it.

How does it compare to gasoline?
It's a bit hard to do a comparison. But let's start with evaluating some "at the pump costs". I get around 30 miles / gallon in my 2000 Honda Accord. If gas costs $3.00/gallon, then I get around $0.10 / mile (5X what the Tesla should get). This is actually even better rates than when it used to cost $0.95/gallon when I was a kid - gas would need to be $0.60/gallon to equal the $/mile rating.

Another way of looking at this is to compare the cost for the amount of range that you're getting. In the Tesla, you'd get $4.90 for 245 miles.

My Honda gets around 450/tank (30 mpg x 15 gallon tank). So if a tank of gas costs me $45 and I normalize for the 245 mile range (get a scale factor of 245/450 = 54%), then it costs me $24.50 to drive 245 miles.

But there's a bit of a utility loss. My Honda can drive from Palo Alto to the San Fernando Valley (north of LA) in 3/4 of a tank of gas. So I have very good range.

There are a couple of things to note from these numbers.
1. Although Tesla's performance numbers are excellence, it's not clear that they're really valuable. The Honda Accord is one of the most affordable cars out there and it's 5X more expensive. By comparison, I don't think if, say, Coke was 5X cheaper than sales would drastically increase or that the quality of one's beverage lifestyle would be great. Coke, even at today's prices isn't unaffordable.

The issue with the Tesla's improved performance is that it comes at a $100K price tag. At that price, the extra savings are more for snobbery than actual value. The Tesla roadster probably isn't a car you would drive around with your kids in everyday. So how much "savings" over a minivan are you really getting? It's not that Tesla's greater performance costs aren't great, it just doesn't seem, on a very utilitarian level, worth the higher price tag.

But the overall performance - including the speed and power performance - are top notch. The car is worth the price just on those accounts. But all things being equal, the cost savings are a bit misplaced (although rich people love cost savings)

2. It still begs the question weather or not PHEVs are that valuable. While the cost savings are great, I still uphold my criticisms of this platform. There is great value derived from being able to drive more than 300 or 400 miles on a single tank. There's also great value in being able to fill your tank in 5-10 minutes.

Fundamentally, it's much more efficient use of energy to use a liquid fuel than carrying an electric charge (via battery) in this type of application. Liquid fuels are still not unaffordable in this country (even at $3.00/gallon). And you'd have to do some fancy Reagon-esque economics to make me believe a stack of batteries is cheaper than a fuel tank and gas cap.

My point is, not all of these things need to be better. The goals of selling a car is to make a nice profit (keeps people working), and provide a good valuable transportation option to the user, and abide by all public safety requirements (including pollution). While PHEVs are certainly a viable option, they're also clearly not a panacea. Further, the notion of making something a PHEV, at this point, mostly fulfills the third requirement (pollution). They're not inherently more affordable - as many gas-guzzling cars today are not unaffordable - and there has yet to be a cost-effective design that provides utility (range, space, and comfort). So I remain skeptical.

Solar Decathalon in DC

2007-10-12T20:14:00.001-07:00

The solar decathlon is going on in Washington DC. This annual contest draws student teams from all over the U.S. to bring a home design that utilizes any variety of "green" technology and erect them - off the grid - on the national mall in D.C. Solar panels, rain water collectors, wind mills and more.

CNet has a great photo gallery of this years' event.

DOE funds CO2 sequestration projects

2007-10-11T18:02:00.000-07:00

The Department of Energy recently awarded funding for three CO2 sequestration projects. The projects focus on sequestering CO2 in deep saline deposits.

DOE Press Release

DOE plans to invest $197 million over ten years, subject to annual appropriations from Congress, for the projects, whose estimated value including partnership cost share is $318 million. These projects are the first of several sequestration demonstration projects planned through DOE’s Regional Carbon Sequestration Partnerships.

The project details are noted below.

This is an interesting development by the DOE. Carbon sequestration is one of the primary means we have to keep our current carbon-based electricity production infrastructure while mitigating the environmental affects. Although there has been much press about carbon sequestration, the testing of the technologies have been slow and expensive. This financial support from the DOE is well needed. It's only drawback - a big one - is that's not enough money. It may take Billions in research to prove out this technology. The sooner we do it, the better.

The projects:

Plains CO2 Reduction Partnership - The Plains CO2 Reduction Partnership, led by the Energy & Environmental Research Center at the University of North Dakota, will conduct geologic CO2 storage projects in the Alberta and Williston Basins. The Williston Basin project in North Dakota will couple enhanced oil recovery and CO2 storage in a deep carbonate formation that is also a major saline formation. The CO2 for this project will come from a post-combustion capture facility located at a coal-fired power plant in the region. A second test will be conducted in northwestern Alberta, Canada, and will demonstrate the co-sequestration of CO2 and hydrogen sulfide from a large gas-processing plant into a deep saline formation. This will provide data about how hydrogen sulfide affects the sequestration process. The Plains partnership includes North Dakota, South Dakota, Minnesota, Montana, Wyoming, Nebraska, Iowa, Missouri, and Wisconsin, along with the Canadian provinces of Alberta, Saskatchewan, and Manitoba.
Total Project Cost: $135,586,059
DOE Share: $67,000,000
Partner Share: $68,586,059
Southeast Regional Carbon Sequestration Partnership - This partnership, led by Southern States Energy Board, will demonstrate CO2 storage in the lower Tuscaloosa Formation Massive Sand Unit. This geologic formation stretches from Texas to Florida and has the potential to store more than 200 years of CO2 emissions from major point sources in the region. The partnership will inject CO2 at two locations to assess different CO2 streams and how the heterogeneity of the formation affects the injection and containment. Injection of several million tons of CO2 from a natural deposit is expected to begin in late 2008. The project will then conduct a second injection into the formation using CO2 captured from a coal-fired power plant in the region. The results of these projects will provide the foundation for the future development of CO2 capture and storage opportunities. The Southeast partnership covers Georgia, Florida, South Carolina, North Carolina, Virginia, Tennessee, Alabama, Mississippi, Arkansas, Louisiana, and southeast Texas.
Total Project Cost: $93,689,242
DOE Share: $64,949,079
Partner Share: $28,740,163
Southwest Regional Partnership for Carbon Sequestration - Coordinated by the New Mexico Institute of Mining and Technology, the Southwest Regional Partnership for Carbon Sequestration will inject several million tons of CO2 into the Jurassic-age Entrada Sandstone Formation in the southwestern United States. The Entrada formation stretches from Colorado to Wyoming and is a significant storage reservoir in the region. The partnership will inject CO2 into the formation after extensive baseline characterization and simulation modeling. The project will test the limits of injection and demonstrate the integrity of the cap rock to trap the gas. Information gained from the project will be used to evaluate locations throughout the region where future power plants are being considered. The Southwest partnership includes the states of New Mexico, Oklahoma, Kansas, Colorado, and Utah, and portions of Texas, Wyoming, and Arizona.
Total Project Cost: $88,845,571
DOE Share: $65,437,395
Partner Share: $23,408,176

Toyota makes Super Prius

2007-10-11T11:24:00.000-07:00

If the snobbery of the current Prius line isn't bad enough, Toyota is apparently showing a concept "Super Prius" at the Toyota Motor Show.

Read Green Car Congress post
Toyota Press Release

The Toyota 1/X ("One-Xth") sports a new interesting look (see sketch above) reminiscent of the Prius. It's a flex fuel plug-in hybrid that is even lighter than its Prius cousin.

Here are some highlights (from the Press Release);

1/X
The 1/X (pronounced "one-Xth") is a concept vehicle that redefines from its very roots the idea of what it means to be environmentally considerate. Among its attributes, the vehicle—with a design that aims to harmoniously coexist with people and society—weighs only “1/Xth” that of other vehicles in its class.

Maintains an interior space on par with that of the Prius, with an aimed-for fuel efficiency that is double and a weight reduced to 420 kilograms (about one third the weight of the Prius).
Combines fossil fuel consumption-reducing FFV* technology and a plug-in hybrid powertrain with a displacement of only 500cc that allows charging from an external power source and a longer electric-motor cruising distance; thus, in addition to being adapted for energy diversity, emits less CO2 and contributes to the prevention of air pollution.
Locates the power unit beneath the rear seat (for a midship, rear-wheel-drive system) to contribute to an innovative and highly efficient package.
Adopts light but highly rigid carbon fiber reinforced plastic (CFRP) throughout the body frame to ensure superior collision safety, while allowing narrower pillars for a better field of vision.

This is a big move for Toyota. Their product development of the Prius has been very incremental at this point. But the 1/X is a very radical move on their part. While the power train seems more incremental (they've already made plug-ins in Japan and FlexFuel isn't very innovative at this point).

The most interesting piece, however, is the composite body that reduces the weight of the car. This seems to be the factor that gives it twice the fuel economy of the Prius (as GCC is reporting). This is a technology that will ultimately change the auto and aerospace industries when it is perfected. This concept could be an indication that they're ready to move onto using composite materials in a bigger way in the future. That, would be the real game changer.

Brazilian ethanol Trojan Horse?

2007-10-10T23:42:00.000-07:00

One of the more pervasive elements of the U.S. ethanol industry has been its well-publicized tariff on imported Brazilian ethanol. The tariff is designed to prevent the Brazilians from flooding the U.S. market with its cheaper product. While this is controversial (Amory Lovins notes it violates the WTO stipulations; I haven't verify that, but I'll take him at his word) it's also what a good government should do for its industries. Similar actions have been taken against a variety of nations over particular products (TVs, Cement, Steel, etc).

But an interesting development in St. Croix, USVI. A local company GeoNet, has started up a new ethanol purification facility on the island. This is a great development for the island in its attempt to spur its economy (in full disclosure, my family is from St. Croix and as such, we have a small personal vested interest in its spurring economy).

Read Virgin Island Daily News Article

Essentially, GeoNet imports diluted ethanol (i.e., not fuel grade) from Brazil. (Technically speaking, it should be around 95% ethanol as there is an azeotrope for water/ethanol mixtures at that level of purity. Purification becomes more costly at that point making it the optimal point for shipping a non-fuel grade product). GeoNet then refines this ethanol/water mixture into 200 proof (100%) ethanol to send to the continental U.S. for blending into gasoline.

This purification facility has an annual capacity of around 100 MM gallons:

The company expects to receive two shipments a month and plans to ship about 100 million gallons of dehydrated ethanol to the mainland each year.

While that's just a drop in the bucket, this could become more wide spread enough to make a real impact in the U.S.

I have no idea of the economics of this situation (how much GeoNet pays for the 95% ethanol or how much it sells for). The article does note, however:

The company [GeoNet] - which is a beneficiary of the V.I. Economic Development Commission tax incentive program - employs 26 full time employees and several independent contractors.

But if this is all above board, this could be an interesting loophole for brining Brazilian ethanol into the U.S.

Salt water as fuel

2007-10-07T14:59:00.000-07:00

Very interesting invention that uses radiation to burn salt water. This could have many useful applications. I'd be interested in getting an overall energy balance with the applied radiation.

Big Oil stalling ethanol?

2007-10-06T16:31:00.001-07:00

BusinessWeek has an interesting article on the oil industry's attempts to impede the development of E85.

This article, without saying so directly, underscores the complexity of the ethanol issue. While the oil industry is profiting from ethanol blending subsidies, it also sees it as a threat of sorts to its core business' viability. The arguments that have emerged, energy efficiency, etc. further complicate the matter. But I think the article doesn't communicate the full context of the argument, however.

Let's look at a few things:

Those who criticize the industry's stance see it as reminiscent of its attempts to discredit the theory that human use of fossil fuels has caused global warming. Mark N. Cooper, research director at the Consumer Federation of America, authored a recent paper characterizing the situation as "Big Oil's war on ethanol." The industry, he writes, "reacted aggressively against the expansion of ethanol production, suggesting that it perceives the growth of biofuels as an independent, competitive threat to its market power in refining and gasoline marketing."

This is entirely true. But only half true. Of course, the oil industry doesn't want its market to be taken away by ethanol producers. So their aggressive posturing is expected. It's their duty as business operators to do so - it just may not be in the public's interest. But they're not in the business of serving public interests - just shareholders. So they collect large subsidies on blending ethanol - yes they profit off of ethanol. But growing ethanol beyond the status of an MTBE alternative is bad for their core business. It isn't necssarily an attempt to discredit global warming or the like. The article goes on to speak of their funding of science to discredit ethanol:

There is perhaps no one more hostile to ethanol than Tad W. Patzek, a geo-engineering professor at the University of California at Berkeley. A former Shell petroleum engineer, Patzek co-founded the UC Oil Consortium, which studies engineering methods for getting oil out of the ground. It counts BP (BP ), Chevron USA, (CVX ) Mobil USA, and Shell (RDS ) among its funders. A widely cited 2005 paper by Patzek and Cornell University professor David Pimentel concluded that ethanol takes 29% more energy to produce than it supplies—the most severe indictment of the biofuel.

This argument seems to be the biggest argument against ethanol. But it's a stupid argument as I've asserted before. Fuels are a product that are needed to run our cars - it's not needed to be energy efficient. Are AA batteries energy efficient? This research funded by the oil and gas companies only really asserts that ethanol is mostly an energy carrier of natural gas. But so what. Isn't that a better option to fuel our cars? How could we argue against natural gas as an energy source but then lobby for PHEVs (which are also powered by some portfolio of fossil fuels)? This argument would be legitimate if the fuel only had to solve the environmental impacts caused by ethanol, not the sourcing security impact. But ethanol does address the later stage. So the research, while arguably accurate, is of little value for making the decision pro/con for using ethanol. Or at least, it's not more impactful than the fact that you can't use ethanol in pipelines.

So these research reports are all more noise than signal.

As tension grows between Big Oil and its critics, ethanol production will keep rising. That may pressure oil companies to accept E85. The industry can absorb almost all the 15 billion gallons projected for production by 2012 in the form of E10. After that, without more E85 pumps, there'll be a lot more ethanol on the market than drivers can find to put in their tanks.

What's left out of this article is the notion of what big oil's real relationship with ethanol or alternative fuels in general are. Given all the money Big oil has, very little investment has been done in biofuels. The BP/DuPont JV is probably the biggest investment to date by a big oil company. Ethanol, biodiesel and other alternative fuels have taken hold throughout the world. But it's not clear how big oil will participate as the world adopts these new technologies. This article merely hints at this notion. While E10 is an initial stop gap (around 14 or 15 Billion gallons of ethanol - we're at around 7 Billion now), it's not clear what will happen after that. Perhaps each oil company has their own ideas. Or perhaps they have no clue.

What is certain is that they all have enough money to buy a big ethanol/biodiesel, etc company. So maybe they need not worry afterall. Overall, this article loses site of this dynamic. The big oil companies need not embrace ethanol on the grounds of the U.S. public. But it also has the opportunity to embrace ethanol or a fuel of its own choice in the long run. And perhaps that's the real missing argument in all of this.

Clean tech start-up CEOs

2007-10-06T14:48:00.000-07:00

In researching start-up companies, one of the first things I look at are the management teams. Silicon Valley has an interesting philosophy towards brining in or investing in management teams. It seems to have a mercenary approach to working with particular executives. They prefer to keep a rather insular set of relationships in terms of finding people. Many of VC-backed companies has some common relationship with the VCs themselves. There's some value to this - only go with what you know. (This, of course, flies in the face of the evidence that shows diversity in exec teams generates higher revenues; this is a key point when you also note that most VC funds loose money).

I started taking a closer look at the CEOs of some of the more popular clean tech start-ups. I saw a couple interesting things. Here's a quick compilation:

Company	CEO	Previous experience

Biofuels
Mascoma	Bruce Jamerson	VeraSun Energy, President, CFO
Amyris Biotechnologies	John Melo	BP, President U.S. Fuels Ops
Imperium Renewables	Martin Tobias	Software entrepreneur
Cilion	Mark Noetzel	BP, Retail Ops, fuel transport, wholesaling
LS9	Robert Walsh	Royal Dutch Shell; Various executive positions
ZeaChem	Dan Verser	Venture investor @ Koch; President of Chronopol
RangeFuels	Mitch Mandich	Apple Computer: Worldwide Sales and Support

Solar
Miasole	David Pearce	CEO of various technology companies
Nanosolar	Martin Roscheisen	Serial Entrepreneur; CEO, eGroups (sold to Yahoo)
SolFocus	Gary Conley	CEO of various technology companies (H2Go, Engage)

Other
Tesla Motors	Michael Marks	CEO, Flextronics
A123 Systems	David Vieau	Exec at American Power Conversion

A couple of these individuals have background that stick-out.

Questionable Picks?
Imperium Renewables' CEO, Martin Tobias, is a former software entrepreneur turned VC. He deserves applaus for putting his money into a biodiesel company. But aside from all of his success in this venture, it begs the question weather or not he himself is the best choice for the job. Money doesn't make you credible or competent. And he doesn't have the resume to run a chemical company. That not withstanding, he seems to be doing a good job.

RangeFuels' CEO, Mitch Mandich is a former Apple Computer executive. Apple's operation seems drastically different than what Range Fuels is doing (biomass gasification and liquefaction). That seems to be very out-of-place. At least Martin Roscheisen at solar manufacturer Nanosolar - founder and CEO of eGroups - has a PhD in electrical engineering. Maybe Mitch is a good leader of technical people - those are hard to find and certainly advantageous. But again, he doesn't have the resume to run a hard-core chemical company. He makes up for it, however, by having a very stellar and experienced support team. But somehow, I get the feeling like Range Fuels is where the White House was circa January 2001.

Another strange one might be Robert Walsh at LS9. LS9, at the moment at least, is a science and research organization. Robert Walsh has no PhD but has a lot of experience running various divisions at Royal Dutch Shell. While that's still a lot of oil industry experience - maybe that's what they were going for - it's not really relevant to their current organization. So I would argue that he doesn't have the resume to lead a small biotechnology research organization. When the company nears its commercialization efforts, his experience may prove more useful.

Right on the money
Mascoma and Amyris seem to have done a great job of filling out their exec teams. Bruce Jamerson at Mascoma has a long history of building and developing VeraSun. John Melo at Amyris seems to have a great history at BP to build from. Their contacts should prove useful as each company attempts to commercialize their technologies.

Michael Marks is also a great choice for Tesla Motors in its current state (in full disclosure, Michael Marks taught a few of my supply chain strategy classes at Stanford). As the former CEO of Flextronics, he has a significant amount of domain expertise in building very technology-heavy products that source products from around the world (think the XBox and XBox 360 launches, and a variety of cell phones). The Tesla roadster, from a supply chain standpoint, has more in common with a cell phone than with a car. It's electronic components are sourced from all over the world - Taiwan, China, Japan, South Africa, UK, and the U.S. Marks is an expert on integrating all of these elements and getting a product commercialized and out the door. So he's clearly a great choice for Tesla's current efforts. Down the road, however, some new blood may be appropriate. But he's the right person for the job at the moment.

All-in-all, each of these individuals seem to be top-quality professionals. But some seem less "qualified" than others. Silicon Valley's model of choosing people that they know doesn't seem to be producing a lot of in-bread managers for some of these technologies. They've had to reach out and find some new ones - many good ones are fleeing BP at the moment. It's not clear which company will be successful - the market will probably have more influence on that outcome. But these guys seem as good as any to run them.

The Right Energy Metrics

2007-10-05T12:58:00.000-07:00

The alternative energy world has been rallying around a few key metrics to measure success. It's not clear to me, however, that these metrics are quite the right ones to look at.

Metrics are important, mainly because it makes it easy for people to rally their heads around. Most managers or politicians don't know (or have forgotten) all the math and statistics that may go into evaluating productivity and efficiency. However, a nice metric makes it easy to ingest. This also presents a danger as a metric may not really represent all the inherent risks involved with that particular measurement. I'm concerned that this may be the case with the clean tech industries. So let's look at a few.

Wind: $/watt
This metric is probably ok. It should be noted that the $ represents to capital cost and watt represents the generating capacity. Wind is a pretty simple technology. Innovation, then, centers around making wind turbines bigger and more durable (to improve the generating capacity), but from cheap/affordable materials to keep costs low.

What may not be included in this metric are the costs involved in the community development often needed to get wind projects approved. This portion of the metric may not be consistent and could represent many inherent risks. Basically, however, the $/watt measurement can be okay given a certain (relatively fixed) capital amount for building a wind turbine, and a variable portion consisting of the costs of "externalities". So it's probably an ok metric to use.

Biofuels: $/gal
I think this metric is not very valuable in that it only reflects one part of the value proposition. From a producer or technology developer, this is a useful metric to get a baseline for how effective your company can compete in that industry.

It doesn't, however, reflect the mileage impact that a biofuel will have on the car it goes into. For instance, a gallon of ethanol doesn't have the same mileage as a gallon of gasoline. So using $/gallon as a metric doesn't normalize for their mileage differences.

Automotive Technologies
- $/gallon (see above)

- Miles / gallon
Similar to the above comment on biofuels, not every automotive technology is the same. Using miles per gallon works for cars now because we use a common fuel source. But new automotive technologies - hybrids, fuel cells, flex fuel, etc - are causing us to need to rethink the notion of miles per gallon.

There are several metrics that are emerging (or should emerge) to give some more insight into comparing different technologies.
$/mile is probably an obvious one. While prices can change - an obvious flaw in using this metric - it at least gives some measure of the cost of ownership of a car. This, then, reflects better on weather or not a consumer will find it valuable.

- grams of CO2/mile
I actually like this metric from the standpoint of showing how much environmental impact. It can be used by any type of automotive technology for comparison on this dimension. But it is flawed in that it doesn't incorporate other performance-related metrics for a particular automotive technology.

In the end, one metric can't encompass all the complexities in designing a good car. So a number of them will be needed. These seem like a good start.

Solar: $/watt
This metric is okay, but it's not really encompassing all relevant elements. The $/watt number needs to encompass the entire install cost of a solar installation. This includes the labor and engineering required for mounting panels in place and wiring it to the grid. So the $/watt number, while good for doing some comparisons, doesn't communicate the whole story. But it is good for doing some good comparisons between jobs.

What's missing in the $/watt metric, however, is a measure of the square footage. Or in other words, the efficiency of a panel isn't incorporated. As alternative solar technologies emerge - CIGS, solar thermal - the notion of area required is going to become more important.

A real technological improvement should be able to generate more wattage out of that square footage. But that's not necessarily the case. For example, CIGS are cheaper than silicon-based technology. So they have a lower $/watt number (lower numerator). But they're also less efficient. So they also lower the denominator (albeit not by as much as the numerator). So they produce a lower $/watt value, but it takes more square footage to generate a usable level of power. This is important because any individual home or commercial property has a fixed square footage that can be devoted to a solar installation. CIGS may be a cheaper alternative, but it won't produce the same amount of power for the available square footage. This is an important caveat that is not represented by $/watt. Watt/sqft would provide more insight on this dimension. $-SqFt/watt might be a nice composite.

Where's Cellulosic Ethanol?

2007-10-03T00:50:00.000-07:00

The ethanol industry seems to have been thoroughly beat up over this summer. The news breaks down to the notion that cellulosic ethanol is the saving development of the ethanol industry.

But where is it?

Wired has an interesting article on alternative energy at the moment...

The issue is, cellulose doesn't break down naturally in a fast way. If it did, the earth probably wouldn't have any (or at least) many forest or other plants. So the search for the right enzyme to allow for us to process ethanol (or whatever biofuels we choose) from basic materials. In fact, if you're wondering who the next Microsoft or Google will be, it's the company that comes up with an easy to produce enzyme(s) that can break down a wide variety of cellulosic materials.

But in my humble opinion, this seems a bit out of context. This enzyme search is a bit quixotic. It's a new search for the holy grail. Producing biofuels to replace hydrocarbons will be an extremely difficult task. It's more prudent to start with basic principles and go from there. And it's important to note, we all have to agree on the solution. So where do we start?

Let's ask some basic questions about what we're doing.

1. The end fuel matters
Having cellulose as a viable option for processing fuels and other products would be great. But the end fuel matters just as much. Ethanol is a flawed product that doesn't quite fit into our current fuel industry. So it begs the question weather or not we're doing the right thing in trying to make ethanol from cellulose as opposed to another fuel.

2. The pathway matters
How we end up choosing to produce all this fuel matters. Bioprocessing and chemical processing both have limitations. But choosing either in processing cellulose can determine the feasibility of the entire fuel industry.

Cellulosic material processing methods may or may not produce the level of scale that is needed to make this industry a broader investigation. There's a lot of different types of cellulose configurations. Our current lab-scale solutions aren't event terribly good for use in the lab. So the notion of cellulosic ethanol being a game changer may not be so certain.

Face facts
There are many technical holy grails that just aren't that feasible. They may also not be necessary. Aerospace has been trying to find a way to make a vertical take off aircraft that can fly like a jet plane. The Harrier are our few attmepts at it. But they're horribly unstable, too expensive, and don't have the real advantages of helicopters or fighter jets. But since we see birds fly everday, we think it must be possible. It might be, but its lacking hasn't prevented us from developing some really capable flying devices (F22, Apache, space shuttle).

Cellulosic processing is the same kind of holy grail. But I would argue that finding won't solve all of our problems. It will give us a few options. But there's many other decisions we still need to make.

Maybe the reality is that we don't employ one solution for everyone. It's possible, and also feasible, that different regions will use a fuel that is appropriate for the local environment. While this certainly isn't optimal, it certainly could be manageable.

Cellulosic, then, need not be the silver bullet that everyone is hoping for. The reality is, it may prove hard to develop and it may not prove scalable enough for our uses. It could be a very real scenario that the "right" enzyme (or whatever the 'play' is to use enzymes) may be expensive to make and unfeasible to make at any large scale to really develop this opportunity. What do we do then?

The best thing, however, is that we determine this feasibility now and come up with some viable alternatives. We'll be better for this in the long run.

How the credit cunch will affect the biofuels market

2007-10-01T22:40:00.000-07:00

CNN had an article today about PE deals that are falling through (Harmon Intl being the big headline) due to the credit crunch. Given how much investment money that is in biofuels at the moment, it begs the question how will these events affect this market. I think there are two big issues at hand:

1. Will the banks give the money?
Banks essentially need two things to secure a debt: hard assets (that can be resold to recoup bad loans) and cash flows to pay interest and principal payments. The heart of the current credit crunch is that too many loans were given out on assets (primarily homes) - perhaps overvalued assets - but not based on cash flow (in the case of individual owners, a substantial income).

The biofuels market tends to be big in assets, but a bit anemic in the cash flow. Many still don't have much cash flow (VeraSun seems ok, but US Bioenergy hasn't reported a profit in a 10-K yet). So the notion of cash flow in this industry seems to be very low compared to the scale of the amount of investments (Tens of Billions in assets, but only tens of millions in cash flow from operations).

So I would assert that the banks would be tentative to give (cheap) money to any firm looking to finance a biofuels facility (or an individual biofuels company with its own backing of sorts) due to the relatively low level of cash flow generated through those ventures.

2. Will equity investors want to take the risk?
Another question is weather or not the equity investors (private equity funds, workers' co-ops, etc) would want to finance a larger part of the investment to accomodate a lower amount (and more expensive) debt financing for a particular project. At the moment, the industry is consolidating rapidly. We're seeing roll-ups of small "companies" (individual plants really), and fewer greenfield projects. The costs of building a plant have gone up in the last year (I believe 40% was the last number I read).

So given the relatively high buy-in costs for greenfield projects, I think there is much higher financial risk posed to equity investors and debt financiers. Given the amount of debt current producers have (and relatively low cash flows), then new, cheap, debt is unlikely to be an option. The last option is going to the public markets for equity (i.e. going public or doing an equity issue) is the only remaining option - and not a good one. The market has not accepted the pure-play ethanol companies and their stocks are mostly down for the year with few exceptions.

This could be a serious hurdle for the biofuels market in that it will limit the speed of industry growth. If the impetus was to get to 35 Billion gallons/yr of capacity by 2012 (or whatever the metric) it will become much more expensive.

I predict the next year will be a bumpy one for the ethanol industry's growth aspiration. But it might have a silver lining if the companies can get some advantageous corn pricing and, perhaps, improve their production efficiencies.

We'll see how they do.

Electric car piece on CBS

2007-09-28T00:51:00.001-07:00

Very nice piece on the electric car on CBS:

http://www.cbsnews.com/stories/2007/09/06/sunday/main3239838.shtml

Features the Tesla roadster and the Chevy Volt.

Michigan congressman Dingell puts forth carbon tax bill

2007-09-27T21:13:00.000-07:00

Let the games begin!

Representative John Dingell (Michigan's 15th District) has developed a draft Carbon Tax legislation.

Let's look at the highlights:

A tax on carbon:$50 / ton of carbon (phased in over 5 years and then adjusted for inflation)

Coal, including lignite and peat
Petroleum and any petroleum product
Natural gas

A tax on gasoline:

$0.50/ gallon of gas, jet fuel, kerosene (petroleum based) etc…(added to current gas tax) (phased in over 5 years and then adjusted for inflation)

Exemption for diesel – The fuel economy benefits of diesel surpass even its emissions benefits; it provides about a thirty percent increase in fuel economy and a twenty percent emissions reduction
Biofuels that do not contain petroleum are exempt. Biofuels blended with petroleum are only taxed on the petroleum portion of the fuel.

**The $0.50 gas tax is in addition to what is derived from the per ton carbon tax in the previous bullet.

And more:

Phases out the mortgage interest on primary mortgages on houses over 3000 square feet.
Expansion of the Earned Income Tax Credit

The revenue from the gas tax goes into the high way trust fund, with 40 % going to the mass transit and 60 % going to roads. The revenue from the tax on jet fuel goes into the airport and airway trust fund.

Finally, the revenue from the fee on carbon emissions will go into the following accounts:

Medicare and Social Security
Universal Healthcare (upon passage)
State Children’s Health Insurance Program
Conservation
Renewable Energy Research and Development
Low Income Home Energy Assistance Program

Wow.... Where to start.

Magnitude
These are huge numbers. $50/ton is a huge number. Just so we have a baseline, the U.S. emits 2Billion pounds of CO2/year from burning coal alone. That would mean a $100Billion year tax on the coal industry.

Further, the U.S. also emits 2Billion pounds CO2/year from driving. That's another $1Billion in taxes (albeit more manageable).

Tack on another $60Billion to cover natural gas emissions (1.2 Billion pounds CO2/yr).

The kicker is really the fact that the auto pollution tax is added on to the CO2 pollution. So that indicates that individuals will be accountable for their own car pollution. That adds another $100Billion.

Wow. That's really far-reaching.

That adds up to $261 Billion/yr in taxation. That's extraordinary.

That would amount to a huge financial burden for individuals and industries over time.

Lifestyle tax
Interestingly enough, this bill also taxes consumers of coal/natural gas electricity via the mortgage tax. Essentially, it asserts that 3000 sq ft is all that is required for the average American family and anything above that is egregious (and presents a harm to the environment). This makes sense from the standpoint of putting a price on a house holds' carbon footprint. But it also seems like a tax on success. Or, more to the point, it would be a tax on people in older communities. Many homes in places like Cleveland or Detroit have fairly large homes - they're old, rather large brownstones or the like that were once owned by the city elites. This could be an undue burden on these families.

It's good that they are also taking poor people into account by improving the earned income tax credit (as though poor people knew how to get the most out of their tax write-offs). They even have a fund for low-income home efficiency programs. That's a nice touch.

Bold Move
This Bill certainly is bold. It would prove an impetus (urgency really) to cut emissions fast. But it's also clearly politically unfeasible. I mean, the government is still infected by lobbies. I don't expect this one to be able to pass the lobby test.

I don't really expect this Bill to go anywhere. It's a little too radical - but I like the boldness. What this bill will really do is create more panic. While a crisis is probably what we need, it's important to note that we don't have very good alternatives. Companies don't have a lot of good sequestration options - it's only in its seminal testing phases now. Individuals don't really have good alternatives for their lifestyle choices. I mean, at these prices, even a Toyota Prius would be a heavy tax burden. And hydrogen technology still isn't ready yet (in spite of my previous post). So I actually don't think this bill is done in the appropriate context.

Good show. We'll see what happens.

Hydrogen from Algae

2007-09-27T16:35:00.000-07:00

Technology Review is reporting some interesting work going on at UC Berkeley attempting to make hydrogen from algae. The 3rd grade explaination is that they are creating mutant strains of algae that produce more or less chlorphyl during the photosynthesis process. Reducing the chlorphyl levels increases the amoung of hydrogen that algae naturally give off during photosynthesis.

Here's an exceprt:

The researchers manipulate the genes that control the amount of chlorophyll
in the algae's chloroplasts, the cellular organs that are the centers for
photosynthesis. Each chloroplast naturally has 600 chlorophyll molecules. So
far, the researchers have reduced this number by half. They plan to reduce the
size further, to 130 chlorophyll molecules. At that point, dense cultures of
algae in big bioreactors would make three times as much hydrogen as they make
now, Melis says.

This sounds like a compelling process, but it's still a little foggy for me in terms of the assumed application. Producing hydrogen in bioreactors sounds okay, but it's the capture and refinement that is always the hard part. This could ultimately determine how effective this process could be in terms of commercialization. Or in other words, it has to scale beyond what their current assumptions are before commercialization becomes viable. But that's a little way off at the moment. They're doing some good science for now.

The article goes on to say:

Switching 100 percent of the algae's photosynthesis to hydrogen might not be
possible. "The rule of thumb is, if we bring that up to 50 percent, it would be
economically viable," Melis says. With 50 percent capacity, one acre of algae
could produce 40 kilograms of hydrogen per day. That would bring the cost of
producing hydrogen to $2.80 a kilogram. At this price, hydrogen could compete
with gasoline, since a kilogram of hydrogen is equivalent in energy to a gallon
of gasoline.

These numbers don't quite sound right to me. While I'm sure his comparison of energy with a gallon of gas is correct, it doesn't seem to match consumption to me.

The 2006 Honda FCX fuel cell prototype (2008 will be a production model) could go 210 miles on 3.75 kg of hydrogen. If 1 gallon of gas = 1 Kg of hydrogen, then the range of the FCX (let's assume 35 mpg - around what a Civic gets) should be around 131 miles. So obviously, comparing energy equvalence isn't a good evaluation. This should be evidence given that we're also comparing two different drive trains as well (fuel cell vs ICE) - that matters in comparing the economics.

Let's think of it another way. A 35 MPG car will use 6 gallons of gas to travel 210 miles. That's around $18 worth of gasoline (at $3/gallon). The FCX will use 3.75 kg of hydrogen to travel 210 miles. At a price of $18 for 3.75 kg of hydrogen (a service equivalent given , the price (not the cost mind you) for hydrogen would be around $4.80/kg of hydrogen. This would be an equivalence point that hydrogen production would need to beat in order to be economically viable with respect to gasoline. If the stated $2.80 / kg of hydrogen is bottoms-up cost of production for this process, then it might be way ahead of where it needs to be (if it's an energy comparison then I'd be skeptical of it). That's a great sign and offers high hopes for hydrogen.

Biodiesel article

2007-09-27T14:06:00.000-07:00

CNN published an article on biodiesel yesterday (thanks Dave and Andy). Essentially, the article is cheerleading for biodiesel as it ought not impact food prices the same way ethanol has. It's an ok article, but it misses several subtleties.

Here's an excerpt:

The U.S. market for [biodiesel] has more than doubled every year since 2004 and will hit $1 billion this year. The number of retail pumps nationwide has grown from 350 in 2005 to more than 1,000 today. A couple of biodiesel IPOs are in the offing - and opportunities abound.

Biodiesel is 30 percent more fuel-efficient than gasoline, which in turn is 30 percent more efficient than ethanol. And while most ethanol produced in the United States comes from a single feedstock - corn - biodiesel has many sources: the oil of seed plants, such as soy and canola, french-fry grease and animal fat. That means the market can weather a price increase in any one raw material.

These are true statements, but it misses some key points.

Feedstocks
It's true that you can make biodiesel from a number of different feedstocks. What's not mentioned is that the yields - more specifically the costs associated with low yields - are not all the same.

A "good" grown feedstock tends to be a very "juicy" vegetable or nut. Algae is being investigated as well due to its ability to convert CO2 into relatively large amounts of oils suitable for biodiesel.

So knowing this, there are clear front-runners for biodiesel feedstocks in terms of current production scale and energy density (amount of oil you can get for an acre of land). Soy beans, Canola, and palm oil lead the list. And that's essentially how the industry has developed throughout the world: Soy beans in the US and South America, Canola in Europe, and Palm Oil in SE Asia. Jatropha is also coming on strong in a couple different places (UK, Mali), but is biggest in India.

The problems here are that all of these commodities have relatively high prices. They're actually on par (from a $/gal standpoint) with diesel fuel. For there really to be a lot of money to be made, then you need a very cheap feedstock. It's not terribly expensive to process this stuff. And transportation isn't that easy either. So a cheap feedstock allows for more margin to be attained given the mandatory transportation and processing costs). Right now, none of the ag plays provide this. Jatropha is compelling because it's essentially a worthless weed. Algae has an energy density orders of magnitude higher than other sources, but doesn't scale well in terms of growing large quantities of it.

The end result is that economics don't really work out for biodiesel alone. If you can keep your costs low on all fronts, then you have some opportunities. But just like with ethanol, most of the money comes from the government subsidies.

Market dynamics
Biodiesel has kind of stalled out at the moment. REG is still the largest player by volume (with 300+Million gallons of capacity). Imperium Renewables just opened a 100Gal/yr plant in Washington. But that's about it for that story. Imperium is going to Argentina next (a good move given their great soy bean industry and their spot in the economic development cycle). Minnesota has a 2% biodiesel mandate in all of its diesel fuel. But that's about all the news there is. There aren't dozens of companies building 100Mil Gal/yr plants. There aren't huge hedge funds buying up dozens of smaller players. The feedstock issue - mixed with reservations over impacts to food prices sparked by the ethanol...unpleasantness - seems to be keeping things at bay.

It's interesting to note, too, that much of the ethanol industry is driven by the need to replace MTBE - an additive that is suspected to be harmful to humans and the environment. Ethanol is a good substitute for it. One could argue that the ethanol industry up until earlier last year was driven by creating enough capacity to replace MTBE altogether. From here on out, I think it will be a bigger push to try and get higher ethanol % in gasoline (like E85).

Biodiesel, by comparison lacks such a non-market driving force. I don't think you'll get wide spread.

So while this article is all true, it's trying to paint a picture that just isn't coming to fruition. There are a lot of things that need to fall into place with biodiesel. It's a compelling choice because it's so accessible to the common man. But for it to be really made into a big enterprise, there needs to be some different economics associated with it - mainly cheaper and easy to manage feedstocks. We have some options, but they're coming along slowly.

One more nuke? NRG submits nuke application.

2007-09-25T21:42:00.000-07:00

While the earth is steadily warming up, hell is apparently getting a little frosty. NRG has applied for a new nuclear reactor permit...and the government is taking it seriously.

You need to read the press releases to get the real gist.

9/24: NRG Energy Submits Application for New 2,700 Megawatt Nuclear Plant in South Texas
9/25: Department of Energy Releases Conditional Agreement for New Nuclear Power Plants
9/25: Statement by Deputy Secretary of Energy Clay Sell on NRG’s License Application

But here's some out-takes.

NRG:

NRG Energy, Inc. (NYSE:NRG) and South Texas Project Nuclear Operating Company (STPNOC) will file a Combined Construction and Operating License Application (COLA) today with the Nuclear Regulatory Commission (NRC) to build and operate two new nuclear units at the South Texas Project (STP) nuclear power station site. The total rated capacity of the new units, STP 3 and 4, will equal or exceed 2,700 megawatts (MWs) - enough to power more than two million homes. NRG expects to bring the units on line in 2014 and 2015 in order to provide reliable and affordable power to fuel Texas' continued growth and economic prosperity.

NRG has chosen Advanced Boiling Water Reactor (ABWR) technology for the new units to be built at the STP site. The technology reflects 50 years of continued evolution of boiling water reactor (BWR) technology and combines the best features of the worldwide BWR fleet with advanced technology enhancements that improve safety, performance and longevity. ABWR technology is certified by the NRC and has an impressive construction and operational track record. This includes setting world records for construction time and bringing the units in on budget.

DOE (1):

EPAct authorizes DOE to enter into contracts with the first six sponsors that begin construction of new nuclear facilities and meet all other contractual conditions to provide risk insurance for certain regulatory and litigation delays in the full power operation of their facility. Up to $500 million in coverage is available for the initial two plants for which construction is started and up to $250 million is available for the next four plants. The Conditional Agreement, the first step in the process toward a risk insurance contract, is available to sponsors of advanced nuclear facilities once its application for a Construction and Operating License (COL) is docketed by the Nuclear Regulatory Commission (NRC). Companies can enter into a Conditional Agreement with DOE, however, only the first six that are issued a COL and begin construction are eligible for the risk insurance contract with DOE.

DOE (2):

DOE is confident that with NRG's reactor design selection and cooperation with their partners, General Electric and Toshiba, this project will likely result in the first of many new reactors being constructed and operated in the U.S. This reactor would join an American nuclear industry that is safe, secure and has a strong record to prove it.

Hell hasn't completely frozen over. There's still a lot more to this story.

This is the first nuclear plant application submitted in 29 years. Something tells me it won't be the last. But while this is big news, it's not really real until a plant gets built and turned on. Then it'll be "real". There's still a lot of red tape to get through. The difference now is that people may actually want NRG to make it through all the red tape. That could be the big difference.

Al Gore has been in the news lately saying that new scientific findings say that we have until 2030 (not 2050) before the ice caps melt. Movements like this are a good start to fighting climate change (and making some extra loot in the process).

Amory Lovins on Charlie Rose

2007-09-25T21:29:00.000-07:00

Originally aired late last year. More from Amory Lovins on the Charlie Rose show. No surprises here, but for those not familiar with his messages, this is a good conversation.

Alcoa and Zhengzhou Yutong team up for light weight busses

2007-09-23T21:47:00.000-07:00

Alcoa and Zhengzhou Yutong have teamed up to develop light-weight bus designs.

From the press release:

“Our companies believe that through the combination of aluminum spaceframe design and advanced manufacturing technologies, we can achieve 15 to 20 percent weight reductions while maintaining the safety and enhancing the sustainability performance of a new family of buses,” Mr. Chen [Alcoa Asia-Pacific President] added.

So obviously the reduced weight improves the fuel efficiency of the bus designs. Prototypes are targeted for completion by the 2008 Olympics in Beijing.

If you've been to Beijing in the last few years, you'll know how polluted it is. You might also notice how old (and overcrowded) their busses and subways are. This type of technology would go a long way in improving both Beijing's pollution problem as well as the reduced cost of fuel.

What's also interesting to know is that this development is occurring in China where they are eager to commercialize these types of technologies (it's also probably a good publicity stunt for Alcoa, but I can't knock them for that). Meanwhile, GM is having some success with its hybrid bus program (although it already faces competition from CNG models, etc). This development could add additional elements to this market and further push this technology to be cleaner and more cost efficient for cities to utilize. That's going to be a great thing for cities around the world.

Wierd Science: Magnets boost ethanol production

2007-09-21T23:44:00.000-07:00

Technology Review is reporting that work done by researchers at the University of Campinas in Brazil showing that applied magnetic fields has increased ethanol fermentation yields by 17%.

You can read the paper to be published here, but the TR article gives a quick overview:

The researchers at the University of Campinas, in Brazil, say that they boosted ethanol yield 17 percent and shaved two hours off of a 15-hour fermentation process simply by circulating the fermentation brew past six magnets, each about the size of an overstuffed wallet. "The fermentation time can be reduced, and consequently, the production cost can also be reduced," says Victor Haber Perez, the University of Campinas food engineer who led the research team.

The article cites some speculation based on previous tests of this phenomenon:

In 2003, Brazilian researchers at the Federal University of Pernambuco, in Recife, created a stir with a report that a static magnetic field caused marked increases in the growth of yeast and the ethanol concentration in laboratory-scale fermentations that used Saccharomyces cerevisiae. (S. cerevisiae is the yeast most commonly used in the Brazilian biofuels industry to produce ethanol from sugarcane.) A year later, however, Spanish radiobiologists at the University of Malaga threw that work into doubt, reporting that they had observed no stimulation of S. cerevisiae when it was subjected to a (much weaker, admittedly) magnetic field. They also failed to observe any impact from the alternating magnetic fields used in some earlier studies.

In simple terms, these researchers found that if you recycle a fermentation tank's contents through an applied magnetic field (the paper describes the specifics in more detail), then the fermentation yield goes up significantly.

While this is a great observation, it's not clear as to what the causal relationship is. There's speculation on weather the applied fields are causing a metabolic improvement within the organism, if it's impacting the pH of the medium, or some other unobserved occurrences.

But science is the business of figuring out why. Engineering is the business of making it work for you. So regardless of the pathways, the work done here shows significant evidence to develop technology around these observations and put them into production. This would be a great boon for ethanol producers looking to improve their yields. It's easy, relatively cost effective (although applied magnetic fields do consume electricity), and could instantly improve a business' gross margins.

Pre-fab condos

2007-09-21T21:35:00.000-07:00

CNN has an interesting article on a new 'pre-fab condo' going up in Miami.

Essentially, pre-fab designs provide for much more efficient construction. Newer designs tend to be more energy efficient as well (a big impact on electricity demand).

From the article:

The $40 million, 15-story Cube, located in Miami's Design District, lets its residents-to-be choose the layout and size of their units by buying small cubes of space in the building.
Each cube costs around $400,000, and you can stack them horizontally or vertically.

Imperium Renewables new plant cost effective...supposedly

2007-09-21T00:48:00.000-07:00

(photo from CNet)
I was reading an article about Imperium Renewables' new 100MM gal/year plant in western Washington. While it claims to have an edge on capital cost effectiveness, it's a bit dubious as to weather or not that is important.

Let's look at a few things.

Cheap Processing Capital Cost

Imperium will spend approximately $78 million on the plant, and $45 million of the cost is associated with holding tanks and distribution infrastructure. Only $30 million goes to equipment for processing fuel. Put another way, that's 30 cents per gallon in capital equipment for producing fuel--relatively low, [CEO Martin] Tobias says.

I think this is a case of where segmenting of costs, as VCs tend to do, sounds smarter than it actually is. While this point is correct, it's not really relevant. I mean, do you need the storage tanks for the plant to work? What difference does it make what % of the overall cost is? This statement is like comparing the cost of your tires with respect to the rest of the car - it doesn't particularly matter as long as you have them - it's all a packaged deal.

Given the photos of this plant, they probably paid a lot for those storage tanks. They're very big - probably on the order of 100,000 gallons (maybe more, it's hard to get an idea of scale). Those have to be fabricated in-place. That's lots of workers with lots of field welds which runs up the costs. Smaller tanks (say, 20,000 gallon range) can be prefabricated and shipped. So depending on how the numbers break out, the big ones may have been cheaper. Maybe Martin is just having sticker shock.

It also begs the question as to why you need a lot of large storage tanks to begin with. Inventory of any kind of frowned upon in manufacturing (it's capital tied up in an illiquid material). It's better, especially for a one-product plant, to run straight through from the rail cars (if you can design it properly). You might only need a few storage tanks for surge capacity. So what's the need for a lot of big, expensive tanks? It could be that the raw material, soy bean oil, is only a seasonal product. They may also need it for all the glycerin they're producing and can't off-load. They may need to keep a lot on hand-for the off season. That's just a guess though.

Why the focus on capital cost?
While having a low capital cost for the capacity is a good thing, it shouldn't, in my opinion, be the most important thing. In all fairness, what this metric Tobias refers to really relates to capital costs relative to the operational expense of the plant. In this sense, he's saying that the real capital "meat" of this plant is the $45 million associated with the processing units (little does he know that storage tanks can have just as many issues with them as processing equipment). This may indicate that the operational costs of the facility may not be that high. This is a false assumption of course - they are dependent on the actual design of the facility, not how much it cost to install.

The capital equipment of a company is a balance sheet item. But these companies are measured cash flow in the market place. Capital depreciation is a non-cash event so it's taken out of the cash flow statement. Capital expenditures (building new plants or extending the life of current ones) also takes away from current cash flow making it expensive to update/improve plants if there's not a lot of cash being produced. So it's always better to design for very low operational expenses - energy usage, plant personnel, annual permitting, maintenance, and repairs. As the article states, this is a low/no gross margin business:

Thus, the raw material alone can cost more than $2.50 a gallon, above the wholesale price of refined, regular diesel. That now hovers around $2.40 per gallon. Without the federal subsidy (the federal government gives subsidies of 50 cents per gallon for used oil and animal fat and $1.00 a gallon for fresh oil) most biodiesel manufacturers would lose money.

So in this sense, having a $45 Million facility with high operational expenses is not better than, say, a $70 Million facility with very low operational expenses. The $70 Million plant will stay in business - the $45 Million won't. So it's not clear that any of the costs Tobias mentions is particularly relevant towards this business being sustainable in the long run - especially since they're trying to go public. They need to design for cash flow, plain and simple.

Or find free vegetable oil.

If you're doing so well...
It's strange that they want to go to off-shore, niche markets next. Hawaii is understandable, because it services the maritime industry. They also have a lot of diesel-generators there. Argentina is understandable because they have a very well developed soy-bean market (2nd only to the U.S.) and they can get cheap SB oil and become a big player - perhaps a global player. They're also going to the east coast - also understandable. They can operate on both coasts.

But that's it.

No California? No Minnesota? No Texas? I guess this underscores the fact that biodiesel development in this country has stalled. While there's certainly a lot of it being made and sold, it's not really growing at the clip that ethanol is (by comparison). Perhaps Imperium is making these strategic moves (good ones mind you) because they see this dynamic as well. The international community has a much higher passion for diesel (especially Europe). So the U.S. may just continue to be further behind. Imperium will need to manage this going forward, but it seems like they've got some good plans to follow.

Great report on Iceland's green energy programs

2007-09-20T18:55:00.000-07:00

CNN has great report on Iceland's "Hydrogen Economy" aspirations.

Iceland ranks 53rd in the world in greenhouse gas emissions per capita, according to the Carbon Dioxide Information Analysis Center -- the primary climate-change data and information analysis center of the U.S. Department of Energy.

The Mercedes F-cell concept is being used by test subjects to get real-world feasibility data:

One car getting put through its paces is the Mercedes Benz A-class F-cell -- an electric car powered by a DaimlerChrysler fuel cell. Fuel cells generate electricity by converting hydrogen and oxygen into water. And fuel cell technology is clean -- the only by-product is water.

I drove the Mercedes F-Cell concept a few years ago. It's a rather early prototype. While it "feels" like a car (Mercedes is actually pretty good at that part), it doesn't drive quite like one. I mean, you hit the gas to go, hit the brakes to stop, and the wheel to steer. But it's sluggish. You feel like you're driving a grocery cart, not a Mercedes. The reason is that the car is heavy. The passengers ride up high because all of the fuel cell equipment is underneath.

But this concept is a few years old. So the fact that they're getting good use out of an older, sluggish car is a good sign. By comparison, a fuel cell Chevy Volt or Honda FCX could provide a much better driving experience.

What is interesting in this report is that there's not much mention about the difficulty or production, storage, or transportation. The test facility mentioned has been featured on a number of shows over the years (most notably Scientific American Frontiers). They make the hydrogen at the gas station using electrolysis. Since Iceland uses nearly all clean energy (lots of geothermal), this is a "clean" form of hydrogen production. Apparently, they're not having a problem producing, storing, and putting it into vehicles - all of the people involved in this study does it without a problem. So it begs the question weather skeptics of hydrogen are really valid in their skepticism.

Iceland will be a great test case for weather Hydrogen is viable or not. While they are definitely a special case it will certainly provide good data for the rest of the world to use in making their own hydrogen economy.

Amyris raising a nice Series B

2007-09-20T01:45:00.000-07:00

Amyris Biotech has raised about half of a $70M Series B. Investors including returning backers KPCB, Khosla Ventures, TPG. This round was led by DAG ventures. When this $70 M round is completed, Amyris will have raised nearly $90M.

From the RedHerring article:

The funding will be used to commercialize and scale up production of the startup’s hydrocarbon biofuels, with the aim of bringing biodiesel to the market in 2010, Ms. Cratsenburg said.

The company is also working to develop a low-cost production process for a hydrocarbon gasoline substitute, or blended fuel, and a hydrocarbon bio-jet fuel.

In spite of what this article says, it's not quite clear what this round is for. $70Mil is a lot of money. I can only think of three scenarios:

1. It's dinner time
Or as the saying goes "when dinner is being served, it's time to sit down and eat." There's a lot of money dedicated to clean tech funds and not enough deals to fund. So the opportunity to buy equity in front-runners like Amyris is a good deal for these funds.

2. Still trying to make the technology work
It's a little scary to think that there's something wrong with the technology. There's a lot of innovation that needs to take place to accomplish their goals. But there's also a lot to build on (biotechnology-based processes are fairly-well developed). So $70Mil would be a good infusion to put the finishing touches and, perhaps build a pilot plant.

3. They have something to commercialize
Amyris was originally founded with a technology that could attack the malaria epidemic. It's even mentioned in this RH article:

The technology, which is still in the laboratory, is based on a microbe-based fermentation process Amyris is developing to more cheaply manufacture artemisinin, an anti-malarial compound.

Its partners in that endeavor are University of California, Berkeley and the Institute for OneWorld Health, a San Francisco-based non-profit drug company that landed a $42.6 million grant from the Bill & Melinda Gates Foundation in 2004.

So it may actually have something to commercialize on this front. One World Health helps to commercialize drugs for the developing world. So a partnership with them could indicate a readiness to commercialize their malaria medicine. I wouldn't be surprised if Amyris sells/liscences its malaria technology to OWH - that would be a big win for OWH and the developing countries they serve.

It's not clear, but I'd bet it's a little bit of all three.

CNet Video of Volvo ReCharge

2007-09-19T18:57:00.000-07:00

Video of Volvo ReCharge concept car. View video at CNet.com.

The car is much like the Chevy Volt where there is a gasoline engine that recharges the car's primary battery. It can also be recharged via a plug.

The ethanol dialogue is broken

2007-09-19T01:22:00.000-07:00

The NYTimes has yet another editorial on the growing biofuels industry and how terrible it is. While it's points aren't wrong, they're misleading in the greater context of the industry dynamics.

Let's take a look:

"Corn is bad"

The distortions in agricultural production are startling. Corn prices are up about 50 percent from last year, while soybean prices are projected to rise up to 30 percent in the coming year, as farmers have replaced soy with corn in their fields. The increasing cost of animal feed is raising the prices of dairy and poultry products.

The economics of corn ethanol have never made much sense. Rather than importing cheap Brazilian ethanol made from sugar cane, the United States slaps a tariff of 54 cents a gallon on ethanol from Brazil. Then the government provides a tax break of 51 cents a gallon to American ethanol producers — on top of the generous subsidies that corn growers already receive under the farm program.

My response to these points, where are factually true, is "so what?" There are three flaws with this argument:
1) Government policies are supposed to financially protect their industries from foreign market fluctuations. There are international agencies designed to prevent this. The issue with the Brazilian ethanol tax is that it violates the WTO rules. So you can't criticize the government for doing their job - let the WTO take issue with it.
2) The economics of corn ethanol are the only ones that made much sense because there are no other alternatives. Cellulosic ethanol is still in a lab (you wouldn't think that given how much press it's gotten lately - but that's the case). And we don't make much sugar cane in this country anymore.
3) There has been way more press on the high cost of animal feed than there has been the high price of milk and steak. Where are the empty shelves in the grocery stores? Where is the cattle industry representatives on TV screaming at the top of their lungs? The reality is that, yes, prices are higher, but they're not that high. I suspect that if you look more closely, the price increases in the supermarket and greater than the cost increases caused by ethanol production. So I think the ranchers are really getting rich off of this. This argument is a farce.

"Even though it's good for America, it's bad for America"

There is nothing wrong with developing alternative fuels, and there is high hope among environmentalists and even venture capitalists that more advanced biofuels — like cellulosic ethanol — can eventually play a constructive role in reducing oil dependency and greenhouse gases. What’s wrong is letting politics — the kind that leads to unnecessary subsidies, the invasion of natural landscapes best left alone and soaring food prices that hurt the poor — rather than sound science and sound economics drive America’s energy policy.

1) What is unnecessary about corn subsidies? Don't oil companies get subsidies too? Where is the outcry about that?

Sure, corn subsidies go to big agribusiness like Cargill and ADM. But the last time I checked, neither were particularly profitable. Even though they generate a lot of revenue - a signal only of scale - they're not particularly profitable - a signal of pricing power. Neither have particularly good balance sheets - a sign of financial strength. These aren't particularly good businesses, even though they are huge enterprises. So I would be concerned that without the subsidies, these companies might actually go bankrupt (they would probably find a way around it though).
2) It is unfeasible to have a cellulosic ethanol industry without first developing a corn ethanol industry. It makes better financial sense for investors to develop a corn-based ethanol industry first and then convert (a relatively small upgrade cost).

3) What landscapes are being destroyed that are best left alone? The grand canyon? The Florida everglades? Are they talking about possibly adding pollution to the skies of LA? Or Houston? That's laughable. We're talking about growing corn in Iowa.

4) "Soaring food prices that hurt the poor"? Since when is hurting the poor an excuse not to do anything in this country?

Poor people in this country are so poor that broader economic fluctuations don't effect them in a traditional fashion. High gas prices don't effect people who don't own cars. And high health care costs don't effect people with no insurance. High taxes don't heavily impact people in prison. And high food costs don't matter to people who use food stamps; or who can't shop at a decent grocery store because there's none in their neighborhood (the city of Detroit has no large-chain grocery stories in its city limits and Wal-Mart is afraid to put a store there). Poverty in this country is a very complex issue that is not explained by broader economic forces. So to assert that they have the most to lose in the development of this industry is just ignorant.

I'm terribly offended by assertion that the biofuels industry is hurting the poor. It's insulting to use their plight as a political objection when their needs are not met by political representation. This person is using poor people as a curmudgeon to support a political agenda. I find that deplorable.

Conclusion

These people don't know what they're talking about. This OpEd piece is evidence of the type of 1-dimensional thinking that seeks only to distort instead of persuade. It asserts a moral hazard. However, all of the risks of said hazard are currently in place and the sky isn't falling (all the negative press is just noise). So it begs the question weather there really is a moral hazard. I say it's a farce. This author all but asserts that doing nothing is better. And that is the real moral hazard.

The consolidation continues

2007-09-17T19:25:00.001-07:00

Four ethanol companies on the east coast - Atlantic Ethanol LLC, Mid-Atlantic Ethanol LLC, Florida Ethanol LLC and Palmetto Agri-Fuels LLC - merged to become East Coast Ethanol. Each company had been building a 100MM Gal/year ethanol plant.

From the Ethanol Producer Magazine article:

Dr. Randy Hudson, Chairman and Chief Executive Officer of East Coast Ethanol, LLC, commented, “Each of these four companies was off to a successful start, but we know that the industry is changing. It is clear that our investors entered into this merger to become part of a larger ethanol production organization, which we believe will help us to improve profitability, our competitive position and our long-term prospects.”

This company, when fully operational, would make it around a second or third tier player in this industry. First tier players, ADM and POET, currently operate a little over a Billion gallons of capacity (and growing). Second Tiers like VeraSun have plans (along with some hopes and dreams) to get to a billion gallons of annual capacity by next year (it currently has around 500 Million gallons. Pacific ethanol has even less, but is diligently building up. So East Coast would be placed after these top tier players, but along side other companies like Biofuel Energy (who should be close to 600 Million gallons by next year).

Air Powered Car Designs

2007-09-17T11:07:00.000-07:00

This is an interesting piece on air-powered car designs.

This is a very compelling technology if can be commercialized appropriately.

Canadian Government sets up C$500 Million biofuels fund

2007-09-16T21:46:00.000-07:00

The Canadian government has set up a C$500MM fund to support the construction of next generation biofuel production facilities.

Read the press release.

This announcement is encouraging. But after closer examination, I could see some concerns.

First, you have to pay the money back:

The NextGen Biofuels Fund™ will support up to 40%, of eligible project costs for the establishment of first-of-kind large demonstration-scale facilities for the production of next-generation renewable fuels. The contribution will be repayable based on free cash flow over a period of 10 years after project completion.

This amounts to a loan of sorts. It's not clear that there is any interest paid, etc. But it amounts to a 10 year loan or bond. That's actually a good thing if it's low-interest (the lower the better). But coming from the government, it begs the question why they don't just give the money to projects in the form of a grant. Even the U.S. DOE does that. I mean, if there's a social benefit to Canada, why not? Maybe they don't have the money. But if it means more business for their population, then they should find it.

Second, this would seem to advantage companies like Iogen over others. They're really the only Canadian company that is in a position to develop another 1st gen plant (although they could potentially not qualify). One might wonder if this fund was set up because Iogen is starting a U.S. operation to build cellulosic facilities - using free grant money from the U.S. DOE. But that not withstanding, at least some of this money might already be tagged by a leading player in that market.

Third, this seems like money that would feasibly compete with venture capital money. While low-cost debt is certainly good U.S. VC money has its own set of benefits. However, U.S. Venture money can make its way into Canada for the right investment. There's so much money in U.S. VC funds that they would jump at a company that has a sound technology that is ready for its first manufacturing facility. So when matched with the opportunity to have access to U.S. VC money and the benefits thereof (access to great managers, other technologies, other debt financing and others). So while this fund sounds like a great opportunity, it doesn't seem better than other options.

GreenCarCongress posting.

Another deal for Brazilian Sugar cane

2007-09-15T14:54:00.000-07:00

Cellulosic enzyme developer Novazymes has created a development agreement with Centro de Tecnologia Canavieira (CTC) to develop cellulosic products (ethanol) from sugar cane bagasse (waste cellulose from sugar extraction process).

Read the Press Release.

The press release notes:

The agreement with CTC (Centro de Tecnologia Canavieira) is a research collaboration with a view to developing bioethanol from bagasse – a residual product of sugar production from sugar cane. The development work will take place in a close collaboration between CTC and Novozymes in Brazil, aided by Novozymes’ R&D centers in the US and Denmark. This future process will enable higher ethanol yield in the production process from sugar cane and will thereby optimize the process economy and energy balance and will also reduce the land use and emission of green house gases further.

There are a few take-aways from this news.

First, we could expect to see even more cheap Brazilian ethanol. Brazil can already produce ethanol at a fraction of U.S. corn ethanol. The science developed from this partnership could reduce these costs even more. (It could also reduce the opportunity for deforestation to produce additional biofuel crops).

Second, this is another U.S. company that is making some big bets on Brazilian sugar cane feedstock. Dow Chemical reported a partnership with Brazilian Crystalsev to make polyethylene from Brazilian sugar cane. In August, Abengoa Bioenergy purchased Dedini Agro, a Brazilian ethanol producer. This seems to acknowledge that Brazilian sugar cane presents a significant business opportunity for U.S.-based companies in making products from carbohydrates. While it's still just hopes and dreams at the moment, it's a strong signal that these industries are having to move away from petroleum-based feedstocks to keep their businesses viable into the future.

Read more: GreenCarCongress post.

Jim Cramer talks Ag-plays

2007-09-15T00:14:00.001-07:00

Jim Cramer gives an interesting word on how to play some of the different agricultural company stocks.

http://link.brightcove.com/services/link/bcpid1155328549/bclid1111461880/bctid1184457647

OECD report

2007-09-14T01:00:00.000-07:00

A Technology Review Blog noted the release of a report from the Organization for Economic Co-creating and Development on weather or not biofuels are a good idea.

This seemed like a really bizarre report on biofuels. While many of its points are, I think, correct, they are of little value for decision making.

Here are some outtakes and some responses:

The information gathered in this paper gives rise to two fundamental questions:
1. Do the technical means exist to produce biofuels in ways that enable the world to meet demand
for transportation energy in more secure and less harmful ways, on a meaningful scale and
without compromising the ability to feed a growing population?

These seem like the wrong questions to ask. The first question is a legitimate question, but its answer, yes or no, is of no value. The report goes on to say that cellulosic biofuels are best, but not enough. It also notes that the economic outlook of cellulosic biofuels is "fragile".

This isn't a valuable question to ask because the immediate follow-up is "now what?" Furthermore, it describes the movement towards biofuels as some kind of faceless monolith that exists only to raise food prices. But it's the high price of oil, political risk over supply, and declining supply that is driving the movement towards biofuels. So the first question regarding technical feasibility is irrelavent given the broader economic spectrum. The market will utilize whatever technology is best to address the market opportunity (expensive, polluting gas).

2. Do current national and international policies that promote the production of biofuels represent the most cost-effective means of using biomass and the best way forward for the transport sector?

Since when have national policies been cost-effective? The answer is no. And it doesn't really matter anyways. First of all, the U.S. and China have the money even at the relatively high costs presented by the paper. Second, in the U.S. at least (I can't really speak to China) the market is what is driving expansion of biofuels and clean tech. I mean, all types of random people are building ethanol and biodiesel plants. And the regulation isn't keeping up.

And lastly, while food prices are high, they're not unaffordable for Americans. If we're talking about other countries not being able to afford American food...then that's another issue. While these matters tend to work themselves out, any U.S. food importation state might want to take a look at its other foreign policy relationships with the U.S. before it complains about corn prices. Mexico, for example, should perhaps rethink its border policing policies before it expresses concerns.

What might be implicated are tax incentives. But tax credits aren't cash. Meaning, the government doesn't really give you a check - you just don't pay in as much. And that shouldn't be reviewed as a form of cost-effectiveness anyways. And furthermore, aren't we giving oil companies tax breaks too? Where's the report showing that this isn't cost-effective either?

So I think the notion of a state economic group contemplating cost-effectiveness is laughable. They're not paying for anything to happen right now (they are, but represent a rather low % of the total investment). And the market, again, will work itself out over time.

I have a lot more to say about this, but I'll leave it for now.

This report seems like a technically accurate, but very politically-slanted report. While its fundamental questions are legitimate, they are so narrowly focused and one-dimensional that their analysis is really of little value. It shows problems - and there are problems - with this industry, but makes no mention that there aren't any alternatives (also important for an economic analysis to note). The only alternative that this report seems to imply is to not do biofuels for the sake of food prices. But food prices aren't what's at stake here (Americans can afford it along with our high-priced health care insurance rates).

In writing this blog, I like to portray a message of thoughfulness (i.e. read between the lines). But I also try to push a message of hope - that the energy crisis a problem that we can solve. We solve problems with optimism, creativity, and hard work. And corn prices not withstanding, these commodities are always in abundance. I think its foolish for this report not to acknowledge that.

PG&E and Tesla partner up on vehicle to grid technology

2007-09-13T22:15:00.000-07:00

Redherring is reporting a partnership between Tesla Motors and PG&E to test the feasibility of a vehicle to grid technology.

This technology would allow cars to be recharged at night (at low demand) and be re-uploaded to the grid during peak hours. The value of this would provide some demand leveling between night and day loads.

From the RedHerring article:

The current project, slated to get underway in the fourth quarter, focuses on controlling when the cars would suck power from the grid so that they aren’t all powering up at once or at peak hours, presumably. PG&E would not disclose how much money they will commit to the project.

Although the company demonstrated that it could plug in a converted Toyota Prius last spring, it has only recently started working with makers of all-electric vehicles. PG&E had worked previously with Tesla on the installation of the Roadster’s charging station at homes and businesses, according to Ms. Zerwer.

This news is a bit strange to hear at this point. If my calculations are correct, the good people at Tesla should be ripping their hair out trying to figure out how to get their roadster to production (remember they've already sold a few of them). This partnership seems more like a distraction at this point.

Furthermore, PG&E has *way* more money than Tesla does at the moment. And they have many other potential partnerships that might provide some bigger dividends (ahem, GE - they're trying to make an electric car too). And they don't really need Tesla's engineers to help them develop the technology required to manage this type of a system (only make sure it's compatible with their vehicle's on board power-management system).

So I think this announcement serves more as a publicity stunt by PG&E. Good press never hurt. But I would guess that its PG&E's way of cozying up to the day's new, sexy business. I guess it's too hard to figure out how to partner with Beyonce or something like that. Tesla seems like the next best thing.

Technology sounds pretty interesting though.

US BioEnergy acquisition of Millenium

2007-09-13T01:01:00.000-07:00

US BioEnergy completed its acquisition of Millenium Ethanol

US BioEnergy Press Release.

The skinny of it is that US BioEnergy bought Millenium and its sole processing facility due to be online next year. This amounts to USBE buying a 100 MM Gal/year plant. That's very good strategy, of course, but underscores a level of speculation occurring in this market. I made a point in an earlier post about private equity and hedge fund players in this market who don't seem to be making long-term growth plans. This type of deal underscores that there is value to be gained by building a plant in hopes of selling off to another bidder. I make this sound negative, but it has many strategic values including locking in low construction prices and acquiring strategically important property for building facilities (that is quickly dwindling in supply).

Their previous press release gave some more details on the transaction:

US BioEnergy Corporation (NASDAQ:USBE) and Millennium Ethanol, LLC today announced that the aggregate consideration pursuant to the merger agreement that the two companies entered into on May 31, 2007 will be approximately $133,320,000, after taking into account Millennium's transaction expenses as provided in the merger agreement. As permitted by the merger agreement, US BioEnergy has elected to pay the aggregate merger consideration with approximately $11,776,000 in cash and 11,500,000 newly issued shares of US BioEnergy common stock (which shares are valued at $10.569, or the average per share closing price of US BioEnergy’s common stock on the NASDAQ Global Market for the ten most recent trading days ending today, August 27, 2007).

This all seems pretty standard-issue from the acquisition standpoint. But it also notes the important of having access to public markets for fundraising. This new stock issuance accounts for $121Million - more than 90% of the share price. Share price, then will be an important metric in coming years for this market to really get big. And I would restate my concern about companies expanding in this method.

Who's leading the charge?

2007-09-12T01:00:00.000-07:00

I was wondering about who is leading the clean tech charge. Being in Silicon Valley, the VC community claims leadership. But having researched the subject intently for several years, I'm not so sure that a crown can really be given. So I wanted to think about this a little bit.

First, what do I mean by "leadership". In this sense, I'm asserting who is making the most strides in making real, measurable change in the energy make-up of the U.S. (specifically - I'm afraid I don' t have much information on the rest of the world, China most notably, but that would be another great post). Let's look at a few characters in this world.

Venture Capital
VCs are easy to pick-on because their work is already well known. The VCs, although not leading in terms of overall industry growth, is leading in the innovation department. The VC community has invested several billion dollars into clean tech projects that range from fuel cell advancements to new biofuels catalysts.

Some of the more interesting projects (in my opinion):
- Living Homes prefabricated, energy efficient, designer homes
- LS9 - using biotech to synthesize hydrocarbons
- ZeaChem - ethanol from (presumably) low-energy gasification and fermentation process
- RangeFuels - ethanol from tree gasification
- Bloom Energy - high quality power to hospitals and data centers
- Fiberforge - carbon fiber manufacturing (used in new auto designs for light-weighting)
- Power generation from sea buoys (haven't seen any front runners)

Government
The government.... Ah yes. Well, various governments throughout the U.S. have taken some bold moves. Others haven't. So it's been a mixed bag. Some highlights have been:
- California requiring all future coal plants built in the state to include carbon sequestration
- Supreme Court ruling that the EPA does have the right (and a responsibility) to regulate auto emissions
- California Solar Initiative (lots of money to help finance solar installations throughout the state)
- New Jersey Solar Initiative (lots of money for solar projects in sunny New Jersey)
- Minnesota's 2% biodiesel mandate
- All states that have passed Renewable Portfolio Standards of > 20%
- U.S. Department of Energy grants to six large scale cellulosic ethanol projects

Some big missing pieces:
- Texas renewable portfolio standard.
- Florida's missing solar agenda (and hopefully a state REC program).
- Still no comprehensive renewable energy legislation mandating adoption and providing funding and guidance.

Private Equity
Private Equity companies have been pouring money into ethanol facilities for several years. Some notable ones have been Greenlight (backing Biofuel Energy) and Goldman Sachs (backing Iogen). But other than jumping in the water, these companies do not seem to be really pushing building long-term businesses (as opposed to really attractive assets). Ethanol competitors POET energy, ADM, and VeraSun have been much more aggressively building their production base. They seem better poised within this industry and are the ones that will ultimately dictate its future structure and dynamics.

Big Corporations
GE, Wal-Mart, and BP have all taken very big bights out of the renewable energy Apple. The interesting thing is that all of them are doing so for very sound business reasons. GE has a very strong wind turbine business (and getting stronger). Wal-Mart may single-handedly change the trucking industry with its demands for a more efficient fleet (not to mention the energy efficiency programs in their stores). And BP already has a billion dollar wind and a growing (albeit not as strongly) solar business. They are also investing in biofuels development and gasification combined cycle facilities. These companies in particular are creating real business opportunities based on energy efficiency and power generation, showing the rest of the skeptics that it can be done.

After looking at all of this, I think the notion of leadership is a bit mushy. Each of these groups have their own objectives and are doing at least an okay job of pursuing them. I think, sometimes this movement needs a Ghandi of sorts. A person, group, voice that gives clarity of what the future holds. But almost none of these organizations are really serving as an example of companies pushing the envelope. Mostly, however, they're people making great changes on their own home turf. But I guess there's a level of power in that too.

Energy Efficient Buildings - Pre Fabs

2007-09-11T01:41:00.001-07:00

I have been really energized by the ingenuity being employed to really attack this energy crisis. But one that is over reported, but under addressed is building efficiency. I've posted some items from Bill McDonough on this blog (he's got some fantastic ideas) that address building efficiency (a bit of a dumb way of saying it). But some techniques that I've enjoyed over the years have been the innovation in pre-fabricated homes.

Pre-fabricated or manufactured homes have been around for a long time. They've usually been pretty ugly or low-quality. Most places regard manufactured housing as trailer homes and have put up prohibitive zoning laws to keep them out of certain neighborhoods. But there's been an explosion in pre-fab housing over the last 3 or 4 years that have produced some really lovely designs that incorporate energy efficiency and environmental friendliness.

I'm not really a treehugger about environmental issues in the sense that I don't believe in changing my lifestyle for the sake of conservation; rather, I believe in employing technology that simply doesn't have negative impact (like light bulbs that last longer and use less power just makes sense, it needn't be a moral issue; racism is a moral issue - that's worth getting mad over). These new pre-fab housing, I think, exemplifies this notion of living with style and "abundance" but without the negative effects of poor/damaging design. These are multistory, designer homes with high-end amenities. But they're designed to consume less, and are manufactured in efficient assembly lines (eliminating a LOT of construction-site waste).

They are assembled in sections. They are designed to be built and transported in individual truck loads and assembled on-site (via a crane). They can usually be constructed in a few days (depending on the size). Finishing can take additional time (interior finishes, appliances, wiring and plumbing, etc). Many can be customized before hand to the customers' specifications.

Here are some of my favorite designs (please keep in mind that these tend to be designer houses and their aesthetics are relative; but I like'em).

Michelle Kaufmann:

Living Homes (backed by Kleiner Perkins Caufield & Byers)

Rocio Romero:

See some more:
FabPreFab.com

Opel Flextreme unvailed in Frankfurt

2007-09-11T01:21:00.000-07:00

GM unveiled an EFlex-based, Open-branded concept car at the Frankfurt Motor show. This model, unlike the Chevy Volt E-Flex models, recharges itself using a turbodiesel engine. It can also be recharged via plugin. It's a lovely design as well.

It's good to see that GM is serious about the E-Flex platform. While its success is still very uncertain, the options presented by this platform are compelling. Essentially, GM can develop a lot of vehicles around this power train, but tailor them to very local conditions.

This seems akin to the value that HP was able to unlock from its printer supply chain by making its printer engines universal and making their power supplies replaceable (this is a classic business school case that illustrates the value created by consolidating technology platforms and designing customization options into the product itself).

This seems to have many more opportunities than are presented to Honda or Toyota in their Hybrids program. If successful, this could be a huge win for GM's future.

- Autoblog coverage
- GreenCarCongress Posting

(Photos from Autoblog):

The impacts of a new energy policy

2007-09-08T13:23:00.000-07:00

The NY Times posted an interesting editorial on the dynamics of energy policy changes that are floating around congress. The editorial is actually fairly bland in its tone, but it touches on a few topics that, I think, have further implications than what is implied. I wanted to weight in on a few of them.

Here's a few thoughts:

Fuel efficiency
This is a bit of a difficult lever for an individual citizen to pull. So while the improved CAFE standards are generally a good thing, there needs to be more options than the car selection to really get an overall fuel efficiency improvement. Or in other words, in addition to buying more efficient cars, we need to not drive as much. And those are tough choices to make that effect every dimension of individuals' lives.

Renewable electricity
A comprehensive energy bill with a national RPS (Renewable Portfolio Standard) standard for renewable electricity would be very well received. Energy RECs - credits generated by producers of renewable electricity - are illiquid and not measured equally in ever state. So a national RPS bill/program would be great. The problem is, however, that its actual rebate incentives that are driving the uptake in these technologies.

Taxing Big Oil
We barely tax these guys as it is. So taxing big oil wouldn't exactly go over very well. Having said that, high oil prices make alternatives viable. So at the moment, high prices and high CAFE standards are a good driving force.

Alternative fuels
I don't think I need to comment on this too much more. But an Energy Bill needs to provide enough support to push for the adoption of cellulosic feedstocks. We're doing it already, but we'll need to keep the party going. And added CAFE standards help a little bit.

What's missing in this article (while it's well taken), is the improvement of our NSF (and other departmental) funding of basic research. This bill is predicated on the viability of technology-based alternatives. But these alternatives aren't that great yet. And we need to get better technologies in order to make these things a reality.

I won't talk about the immigration issue.

Virent gets looted up

2007-09-07T19:58:00.000-07:00

Virent raised a $21 Million Series B. While this is a great valuation, it's not the number that should get anyone excited. The round was led by Venture Investors, Stark Investors, and Cargill Ventures.

It's been reported that there's more green venture money than actual green ventures to invest in. So comparably, a good deal will get some good terms attached to it. So this $21Million could actually seem low from that perspective. But this could indicate a level of prudence by the company executives (remember, raising large sums of outside equity isn't necessarily a good thing).

What I find interesting is the spectrum of partnership and investors that they have attracted to their company. In particular, Honda, Shell Hydrogen, and Cargill. All big companies with a lot vested in the developments within the fuel and agricultural markets. So I think this begs a re-look at their technology platform.

Virent is pushing a technology they call Bioforming(TM). While I don't know what it does (I'm sure it's nice and complicated), but it appears that it's a process/technology/platform that allows for a "many to many" business model to become economic. In this sense, they can process multiple feedstocks and produce multiple products (gases, biofuels, and chemicals). That's a rare technology that many other fuel start-ups have not incorporated into their value propositions (that's not necessarily bad, I just haven't seen it before). So Virent seems unique in that element.

Good job to them and we'll keep an eye out for further news.

BW Article outlines some to-do items for U.S. energy policy

2007-09-05T22:54:00.000-07:00

Business Week features an article written by individuals from VC law firm HellerEhrman's energy practice. It's a good article, but I think it's overstating its assertions in some cases. Here are a few points

Investments

One problem is that despite investor enthusiasm, the VC community traditionally looks for rapid returns. Market cycles for newer clean technologies from early development to mass deployment often have longer time frames. And while the world's ever-growing need for energy suggests global market potential, can these technologies be deployed reliably and at a scale large enough for utilities and other large sectors of the economy to adopt and use?

This isn't entirely true. While VCs do tend to want a 10 year payback, not all VCs are early-stage investors. VCs have been large backers of biotechnology and medical device industries for a long time now. So there's an established paradigm of investing in these types of companies. There is always the option for VCs to get liquidity of their ownership from other VCs in later, higher valuation rounds. So there are opportunities for early stage VCs to get their money out if they need to. So this point shouldn't spell doom for the investment element of the cleantech industry (and given how much money has gone into it, it hasn't).

It's also important to note that VCs aren't the only ones investing in this area and that their involvement in this industry, while playing an important role, should not be seen as the primary investment opportunity.

Bubble?
Some suggest that a clean-tech bubble is likely, similar to the boom and bust in alternative energy in the 1970s or the Internet and telecommunications in 2000.

I've already addressed this in a previous post. But I would just reiterate that bubbles are based on faulty valuations. While there is a lot of investment out there, the market potential for this industry is very high. So the valuations that are going on at the moment don't seem so out of place (unlike the internet boom which was based on faulty fundamental assumptions).

Incetives

The development of energy technologies that are economically viable independent of tax incentives is paramount. In the long run, these emerging technologies need to be able to compete with conventional technologies in a free market. Within the next 5 to 10 years, wind, solar, and clean coal technologies could become viable and deployed at scale without tax incentives. To reach a scale that cuts costs and makes a difference, the cost and risk associated with clean technologies must become conventional enough that utilities—which are risk-averse and conservative by nature—will own or purchase the output of these new energy facilities.

This is all true. But the nature of the technologies being developed do not require 5 to 10 years to show itself viable. So the threat of unrenewed tax incentives in 2008, while certainly a short-term problem, ought not stop the technological development.

For example, solar isn't solely successful now because of tax incentives. It is successful because of high electricity prices and better technical efficiency. The same could be said of wind. The Solar industry has gotten great economies of scale in its production facilities and improved technologies are coming out all the time. The problem, however, is that solar isn't quite good enough. The capital cost required for the amount of power capacity ($8/watt all-in) just isn't great enough. Or, said another way, you need too many panels to produce too little power. The incentives programs throughout the country (California, New Jersey, Connecticut in particular) essentially offer huge discounts to developers for these systems. That discount, on the order of 15%, mixed with high energy prices (say > $0.11/kWh) is what is giving us this huge solar push at the moment. If that 15% discount goes away, it won't stop the development. It will change the economics so that solar is a longer-term investment (and some of the business models that are being employed now become not as attractive). But it won't stop it. As solar improves, so will the uptake.

So all this is to say that the incentives aren't as necessary as they were in the 70's as they are now. So while their take on the matter is correct, it's not a game-ender. There's enough of a market going on now to keep driving innovation and uptake of the product.

Is China better at this?

The U.S. needs to be more forward-thinking. Although it is fair to speculate about its implementation, China's national renewable-energy law, passed in February, 2006, is more aggressive in setting mandates for the development and use of renewable energy than any U.S. federal law.

This seems like an apples to oranges comparison. While I'm sure that the communists are better at setting country-wide regulations than the U.S. (remember, people still don't vote there), it's not clear that their policies are necessarily better. The U.S. has decades of experience with successful environmental regulations.

As much as conservatives bitch about having to abide by them, one only need to look at California's air quality to know that it's working. And if you've been to Beijing lately, you know that theirs aren't (or haven't yet). I also haven't heard of any utility going out of business because the cost of environmental regulation was just too much to bear.

And let's give some credit: some utilities are getting this right. High electricity prices are peaking some other people's interest at generating power (even BP is putting up a 500 MW combined cycle plant at its Carson facility). Players like PCG is very progressive in adopting new technologies.

So I think the U.S. has created some different opportunities that China does not have at the moment. They need stringent regulation because they don't have a real free market to develop some of these new opportunities. So the U.S. is, I think, in a better position that doesn't require the steps that the Chinese are taking. So while the point is well taken, it should be understood in a different context.

SolFocus deal a bad indicator

2007-09-05T01:38:00.000-07:00

The cleantech world is abuzz with SolFocus' latest round of $52Million in VC financing.

RedHerring article and an excerpt:

A little less than half of the amount will be used to launch SolFocus Europe, the new Madrid-based subsidiary, while the remainder will go to the parent company as a second funding round. New Enterprise Associates was joined in the deal by Moser Baer India, Metasystem Group, NGEN Partners, Yellowstone Capital, David Gelbaum, and other investors, the company said. The infusion brings SolFocus’ total funding to date to $84 million.

A more disturbing note is the following:

Earlier this summer, SolFocus bought Madrid-based Inspira, a maker of devices that, by tracking the sun in two directions, can get up to 40 percent more power from conventional silicon-based panels over the course of a day in sunny climes than conventional trackers, Ms. Hartsoch said.

While news like this is usually lauded as a success, it's a bit of a false positive for a few reasons.

Why would you need that much money?
It's strange that SolFocus would need this much money without much by way of actual business being done. It raised $32 Million in its series A. Where did that money go? Well, I won't speculate. But I can be certain that it didn't go to a large manufacturing operation (they signed a deal with a contract manufacturer a year ago), it didn't go into marketing for several large, multi-megawatt "test" installations - none have been reported.

In fact, SolFocus' website only admits to having one 500kW test facility (nothing to write home about), a small pilot manufacturing facility (2MW...I could build that in my backyard), and a lot of money raised. I'll ask again, where did all that money go?

They still need technology?
You would think that a company named "SolFocus" wouldn't need to buy another company for its solar alignment technology. This paints a picture that SolFocus has been unable to get its alignment technology to work. While this ought not be a big deal, I would suspect that it is a deal breaker.

The solar industry is booming and concentrator technology should be a big hit. They were an early entrant. They should be rocking and rolling right now with potential deals. But how does an upstart like GreenVolts get so many more demo deals done in half the time? (I will disclose that one of my Stanford classmates is a VP at GreenVolts; he's also one of the smartest people I know - which probably explains why they're so successful).

The story / conjecture
You shouldn't be raising a $52Million round unless you're trying to actually get a business off the ground with some hard assets. This story about "cornering the European market" sounds bogus. You can't corner the market with a product you haven't shipped to customers yet. You can't even ship a product that you didn't even have a core technology for until you bought it a few weeks ago. So while I don't have any idea of what's going on over at SolFocus, this fund raising report smacks of suspicion.

This deal smells of WebVan where scale was bought before the model was proven. SolFocus doesn't appear to have the technology platform or manufacturing base that is usually the usage of such a high round of financing. The valuations sound really high and the milestones they're reporting seem unreached. That doesn't make out for a good story.